What is FOIR?
FOIR stands for Fixed Obligation to Income Ratio. It measures what percentage of your monthly income is already committed to fixed financial obligations — primarily loan EMIs and credit card minimum payments.
Lenders use FOIR to determine whether you can afford the new EMI you are applying for. If too much of your income is already locked in existing obligations, lenders will not add more — regardless of your CIBIL score.
How FOIR is Calculated
| Component | Amount |
|---|---|
| Monthly Salary | ₹60,000 |
| Home Loan EMI | ₹12,000 |
| Vehicle Loan EMI | ₹6,000 |
| Total Obligations | ₹18,000 |
| FOIR | 30% |
In this example, 30% FOIR means 30% of income is already committed. Most lenders will approve a new loan if the total FOIR after the new EMI stays under 50-55%.
What is a Good FOIR?
Below 40% — Strong. Lenders will approve comfortably and offer competitive rates.
40% to 55% — Acceptable. Most banks will still approve but may limit the loan amount.
Above 55% — Risky. Most banks will decline or require a co-applicant. NBFCs may approve at higher rates.
Above 65% — Very High. Approval is unlikely from any formal lender.
Declared FOIR vs Real FOIR — The Gap That Costs Loans
Here is where most borrowers get caught. When you submit a loan application, you declare your EMIs. But lenders estimate your real FOIR — which includes obligations you did not declare.
| Obligation | Declared | Real |
|---|---|---|
| Monthly Income | ₹55,000 | ₹55,000 |
| Home Loan EMI | ₹14,000 | ₹14,000 |
| Monthly Rent | Not declared | ₹12,000 |
| Instant Loan Repayment | Not declared | ₹4,000 |
| Total Obligations | ₹14,000 | ₹30,000 |
| FOIR | 25% | 55% |
The FOIR gap: In this example, declared FOIR is 25% — looks perfectly fine. Real FOIR is 55% — borderline for approval. Banks cross-reference bank statements, rental agreements, and bureau data to estimate the real number. The borrower thinks they will easily get approved. The bank sees a very different picture.
How to Improve Your FOIR
Pay off existing loans before applying. Every loan you close reduces your FOIR directly. Even paying off a small instant loan can meaningfully improve your ratio.
Increase your income documentation. If you have additional income — rental income, freelance projects, spouse income — document it formally through bank statements. Higher documented income lowers your FOIR.
Apply for a smaller loan amount. A smaller loan means a smaller EMI, which means a lower projected FOIR. Sometimes reducing the loan amount by 20% is the difference between approval and rejection.
Add a co-applicant. A working co-applicant adds their income to the calculation, which reduces the combined FOIR significantly.
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NextScore calculates both your declared and real FOIR — and shows you the gap. Free, 2 minutes.
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