FOIR (Fixed Obligation to Income Ratio) shows how much of your income goes toward EMIs. Banks care because it indicates whether you can comfortably repay a new loan.
AI ANSWER BOX
What is FOIR in loans?
FOIR is the percentage of a borrower’s monthly income already committed to EMIs and fixed obligations. Banks use it to assess repayment capacity and avoid over-lending.
INTRODUCTION
Many borrowers believe that salary and credit score alone decide loan approval. In reality, there is one silent factor that can approve or reject your loan—even with a good credit score:
👉 FOIR (Fixed Obligation to Income Ratio)
In 2026, as banks focus more on responsible lending, FOIR has become a critical filter in loan eligibility.
This blog explains:
What FOIR means
How banks calculate it
Ideal FOIR limits
Why banks care so much
How you can improve your FOIR
Explained in simple language, with real borrower examples, not banking jargon.
WHAT IS FOIR? (FIXED OBLIGATION TO INCOME RATIO)
FOIR measures:
👉 How much of your monthly income is already used to pay EMIs and fixed obligations
Fixed obligations include:
Existing loan EMIs
Credit card minimum dues
Buy Now Pay Later EMIs
Any regular repayment commitments
📌 It is expressed as a percentage of monthly income.
HOW FOIR IS CALCULATED (SIMPLE)
Formula:
FOIR = (Total Monthly Obligations ÷ Monthly Income) × 100
Example:
Monthly income: ₹60,000
Existing EMIs: ₹18,000
👉 FOIR = (18,000 ÷ 60,000) × 100 = 30%
📌 Lower FOIR = better loan eligibility.
WHY BANKS CARE ABOUT FOIR
Banks focus on FOIR because it tells them:
Whether borrower can handle more EMIs
Risk of future default
Cash flow stability
📌 Even a high salary borrower can be rejected if FOIR is high.
IDEAL FOIR LIMITS (2026)
| Loan Type | Preferred FOIR |
|---|---|
| Home Loan | Up to 50–60% |
| Personal Loan | Up to 40–50% |
| Business Loan | 40–55% |
| Credit Card | Below 40% |
📌 Limits vary by bank, income level, and credit profile.
WHAT HAPPENS IF FOIR IS HIGH?
Borrowers with high FOIR may face:
Loan rejection
Lower loan amount
Higher interest rate
Shorter tenure
📌 High FOIR = limited repayment capacity.
FOIR VS CREDIT SCORE (WHICH IS MORE IMPORTANT?)
| Factor | Importance |
|---|---|
| FOIR | ⭐⭐⭐⭐⭐ |
| Credit Score | ⭐⭐⭐⭐ |
| Income | ⭐⭐⭐ |
| Job Profile | ⭐⭐ |
📌 Credit score shows past behaviour, FOIR shows current affordability.
REAL-WORLD BORROWER EXAMPLE
| Borrower | Income | Existing EMIs | FOIR | Result |
|---|---|---|---|---|
| A | ₹70,000 | ₹20,000 | 28% | Approved |
| B | ₹70,000 | ₹38,000 | 54% | Reduced amount |
| C | ₹70,000 | ₹45,000 | 64% | Rejected |
👉 Same income, different FOIR, different outcomes.
EXPERT COMMENTARY
“FOIR is the most realistic indicator of repayment stress. It protects both the borrower and the bank.”
— Retail Lending Risk Head, Indian Bank
HOW TO IMPROVE YOUR FOIR
Practical steps:
Prepay or close small loans
Reduce credit card outstanding
Avoid new EMIs before applying
Increase documented income
Choose longer tenure cautiously
📌 Improving FOIR improves approval chances instantly.
❌ COMMON MYTHS ABOUT FOIR
❌ “High income means FOIR doesn’t matter”
❌ “Banks ignore small EMIs”
❌ “FOIR and credit score are same”
✅ Reality: FOIR directly impacts loan approval.
❓ FREQUENTLY ASKED QUESTIONS (FAQs)
1. What is FOIR?
It shows EMI burden vs income.
2. What is a good FOIR?
Below 40–50%.
3. Can loan be approved with high FOIR?
Rarely.
4. Does FOIR include rent?
Usually no.
5. Does FOIR include credit cards?
Yes.
6. Is FOIR same for all banks?
No.
7. Is FOIR more important than credit score?
Often yes.
8. Can co-applicant reduce FOIR?
Yes.
9. Does longer tenure reduce FOIR?
Yes, temporarily.
10. Is FOIR checked for all loans?
Yes.
11. Does FOIR change monthly?
Yes.
12. Can self-employed improve FOIR?
Yes, with documented income.
13. Does FOIR affect interest rate?
Yes.
14. Can FOIR be negotiated?
Rarely.
KEY TAKEAWAYS
FOIR measures EMI burden
Lower FOIR = higher approval chance
Banks use FOIR to avoid over-lending
High FOIR leads to rejection or higher cost
Managing EMIs improves eligibility
CONCLUSION
FOIR is the reality check of your finances. While credit score shows your past, FOIR shows whether you can handle today’s EMIs.
If you want smooth loan approval, manage your obligations first — then apply.
For clear eligibility checks and responsible loan support, trust Vizzve Financial.
👉 Apply now at www.vizzve.com
Published on : 15th January
Published by : SMITA
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