What is FOIR? Formula and Its Impact on Your Loan Approval
Reviewed by: Fibe Research Team
- Updated on: 4 May 2026
If you’re planning to apply for a loan, one term you’ll often come across is FOIR. For those wondering what is FOIR in loan approvals? It tells lenders how much of your income is already going towards fixed expenses. The FOIR full form is Fixed Obligation to Income Ratio. It’s one of the key factors that decides your loan eligibility.
This number helps lenders assess your repayment ability. A high FOIR means you already have too many liabilities. A low FOIR means you may handle a new loan better.
Read on to learn more about the FOIR meaning, FOIR calculation formula and how it fits into the loan application process.
Table of Contents
How is FOIR Calculated for a Personal Loan?
The Importance of FOIR Calculation in Loans
Table of Contents
What is FOIR in Loan?
The FOIR meaning is simple. It shows the percentage of your income already used for the repayment installments of existing loans, credit card bills, rent and other fixed payments. In India, FOIR is similar to the debt-to-income ratio used globally. It helps lenders judge your creditworthiness.
Some lenders use your gross monthly income to calculate FOIR. Others use your net income after tax and deductions. A low FOIR means more disposable income and a higher chance of getting approved.
How is FOIR Calculated for a Personal Loan?
To calculate FOIR for a personal loan, lenders use this basic FOIR calculation formula:
FOIR = (Total Fixed Monthly Obligations ÷ Net Monthly Income) × 100
What counts as obligations:
- Ongoing loan EMIs
- Credit card dues
- Rent, if applicable
- Any other fixed monthly payments
What’s not included:
- Taxes
- Provident fund
- Insurance deductions
FOIR calculation with example:
Let’s say someone’s monthly income is ₹60,000. They pay:
- ₹15,000 towards a home loan EMI
- ₹5,000 for a personal loan EMI
- ₹8,000 as rent
Total obligations = ₹28,000
Now applying the formula:
FOIR = (28,000 ÷ 60,000) × 100 = 46.67%
In this case, the FOIR is 46.67%. Depending on the lender, this may or may not meet their eligibility limit.
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Ideal FOIR (Fixed Obligation to Income Ratio)
FOIR represents the percentage of your income that goes toward fixed monthly obligations like EMIs, rent, and other debts. Lenders use this to assess your repayment capacity.
| FOIR Range | Category | What It Means | Lender Perspective |
|---|---|---|---|
| Below 30% | Excellent | Very low financial burden; high disposable income | Strong approval chances, better interest rates |
| 30% – 40% | Ideal / Healthy | Balanced obligations and income | Considered safe for most loans |
| 40% – 50% | Acceptable | Moderate financial commitments | Loan approval possible but may involve stricter checks |
| 50% – 60% | Risky | High dependency on income for debt repayment | Lower approval chances; may require higher income or co-applicant |
| Above 60% | High Risk | Majority of income tied to obligations | Likely rejection due to repayment risk |
The Importance of FOIR Calculation in Loans
Your eligibility for a instant loan highly depends on your FOIR. The lower the FOIR, the better it is. Here’s why it matters:
- Impacts loan approval: A high FOIR may lead to rejection even with a good credit score
- Shows repayment capacity: It tells lenders if you can handle more debt
- Applies to all loan types: FOIR is checked for personal, home and even business loans
- Matters more for unsecured loans: Since there’s no collateral, FOIR carries more weight
- Lower FOIR = better chances: It suggests you have enough room to take on new EMIs
How do Lenders Calculate FOIR?
Most lenders follow a basic process to check if you can handle another EMI. Here’s how they usually calculate your FOIR:
Step 1: Add your fixed monthly obligations
This includes EMIs for any loans, credit card dues and rent if applicable.
Step 2: Check your income
- If you’re salaried, they use your net monthly income.
- If you’re self-employed, they may consider gross income along with average monthly earnings.
Step 3: Add the new loan EMI
The EMI for the loan you’re applying for is added to your current monthly liabilities.
Step 4: Compare against their FOIR limit
Each bank or NBFC may have slightly different policies. But most lenders have a cap between 40% and 55%. If your FOIR stays below this, you have a faster and better chance at approval.
Tips to Improve Your FOIR
If your FOIR is too high, here are a few simple ways to bring it down:
- Repay smaller loans: Clearing just one EMI can improve your ratio
- Increase income: Freelance work or rental income can help boost earnings
- Apply jointly: A co-applicant’s income can reduce your individual EMI burden
- Choose a longer tenure: A smaller EMI brings down your FOIR
- Avoid back-to-back loan applications: Keeps your monthly outgo under control
Most lenders consider a FOIR of around 40% to be healthy. It gives you better chances of loan approval, especially if you’re applying for unsecured credit.
If you’re preparing to apply, choosing a loan provider with a simple and quick process can make things easier. With Fibe, you can check your eligibility online and get funds of up to ₹10 lakhs in just a few minutes! No collateral, no stress. Download the Fibe Personal Loan App now to get started!
FAQs on FOIR
What is a good obligation ratio?
Ideally, a FOIR under 40% can help boost the approval chances for an affordable loan.
What should I do if my FOIR is high?
If you have a high FOIR, you can either increase your net income or reduce your debts. Alternatively, you can adjust your loan application to lower your EMI or make a joint application to reduce the EMI burden.
How to increase FOIR?
Increase income, prepay existing loans, avoid new debt, opt for longer tenures to reduce EMIs, consolidate multiple loans, and cut unnecessary expenses. Lower obligations or higher income improves your FOIR.
How much FOIR is good?
An FOIR below 40% is considered good by most lenders. Below 30% is excellent, while 30–40% is acceptable. Higher FOIR may reduce your chances of loan approval.
What is high FOIR in loans?
FOIR above 50% is considered high. It indicates most of your income goes toward obligations, making lenders view you as a higher-risk borrower with limited repayment capacity.
