What Is FOIR? How it is Calculated for a Personal Loan?

What is FOIR? Have you heard or read about the concept of FOIR? FOIR stands for Fixed Obligations to Income Ratio.

It is also known as the debt to income ratio. It should range from 40 to 50% for getting quick personal loan approval.

Let’s know more about FOIR is this short post!

What is FOIR?

For lenders, your capacity to repay a loan is the most vital thing. They consider it mostly when you apply for a personal loan and more.

Before sanctioning a loan, every lender wants to ensure that an applicant can repay the loan on time and meet eligibility criteria.

To do that, they also look at your FOIR other than checking your CIBIL score, income proofs and more.

How is FOIR calculated?

To calculate FOIR, banks consider all sources of income and EMIs of all ongoing debts. If your obligation is eating into your income, it means that your FOIR may be higher. It means that you may default on short term loan repayments. Hence, your loan application may be rejected.

If your income is Rs.40,000, and your current obligation is Rs.20,000, your FOIR will be 50%.

FOIR = Sum of all obligations/Monthly income x 100

Since your FOIR, in this case, is 50%, you may have the required ability to repay an upcoming loan. Hence, if you apply for personal loans, your application may be approved.

You can reduce your obligations if you wish to get approval for a large loan amount at a lower rate. Thus, you ought to ensure that your FOIR remains between 40% and 50%.

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Must Read: Complete Guide About FOIR