FOIR Decoded: The Single Metric That Makes or Breaks Your Loan Approval
Short Information: FOIR (Fixed Obligation to Income Ratio) is the most critical metric in credit underwriting. Learn how banks use FOIR to approve or reject your loan application.
What is FOIR?
FOIR stands for Fixed Obligation to Income Ratio. It measures what percentage of your monthly income is already committed to fixed obligations like existing EMIs, rent, and other recurring payments.
In simple terms, FOIR answers the question every bank asks:
“After this person pays all their existing obligations, do they have enough money left to comfortably pay the new EMI?”
The FOIR Formula
FOIR = (Total Fixed Obligations / Gross Monthly Income) x 100
Fixed obligations include:
- Existing EMIs (home loan, car loan, personal loan)
- Proposed new EMI
- Rent (if applicable)
- Credit card obligations (5% of total limit)
FOIR Thresholds in India
| Category | Conservative | Aggressive |
|---|---|---|
| Salaried (MNC/IT) | Up to 50% | Up to 55-60% |
| Salaried (Government) | Up to 50% | Up to 55% |
| Self-Employed | Up to 40% | Up to 50% |
| High Income (Rs 1.5L+/mo) | Up to 55% | Up to 60-65% |
Two Real Cases
Case A: Rahul – The Cautious Planner
- Monthly Income: Rs 85,000
- Existing EMIs: Rs 8,500
- Card Limit: Rs 1,50,000
- Proposed EMI: Rs 28,000
- FOIR: 51.8% – APPROVED
Case B: Priya – The Hidden Squeeze
- Monthly Income: Rs 85,000
- Existing EMIs: Rs 18,000
- Card Limit: Rs 6,00,000
- Proposed EMI: Rs 28,000
- FOIR: 89.4% – DECLINED
How to Reduce Your FOIR
- Reduce credit card limits
- Close unnecessary loans
- Add a co-applicant
- Show additional income sources
Common Myths
Myth: CIBIL 780+ means FOIR doesn’t matter
Wrong. CIBIL shows past behavior. FOIR shows current affordability.
Learn More
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