FOIR

Full form: Fixed Obligation to Income Ratio

Loans & Credit

FOIR is the percentage of gross monthly income that goes towards all fixed debt obligations -- existing EMIs plus the proposed new EMI. Banks use FOIR to assess loan repayment capacity and typically cap it at 40-55%.

In detail

FOIR is the primary tool banks use to determine your maximum loan eligibility. Most banks apply: 40-50% FOIR for salaried, 50-55% for self-employed. Premium salaried borrowers (income above Rs 1L/month) may get 55-60%.nnStrategic implication: closing existing personal loans or car loans before applying for a home loan significantly increases eligibility. A Rs 10,000/month existing EMI reduction frees up eligibility for approximately Rs 11L more home loan at 8.5% for 20 years.

Formula

FOIR = (Sum of all monthly obligations / Gross monthly income) x 100 Max eligible EMI = Gross income x FOIR% - Existing EMIs Max loan = Use EMI calculator in reverse with max eligible EMI, rate, tenure

Real-life example

🇮🇳 India example

Rohit earns Rs 75,000/month. Existing car loan EMI: Rs 8,000. Bank applies 50% FOIR. Max total obligations = Rs 37,500. Available for home loan EMI = Rs 37,500 - Rs 8,000 = Rs 29,500. At 8.5% for 20 years, this translates to maximum home loan of approximately Rs 33.2 lakh.

Frequently asked questions

How can I increase my loan eligibility by improving FOIR? ▼

Close existing high-EMI loans before applying. Add a co-applicant (spouse, parent) -- joint income doubles the eligible loan amount. Opt for longer tenure to reduce required EMI (though this increases total interest paid).