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FOIR

Loan & Credit

Fixed Obligation to Income Ratio

The percentage of your monthly income that goes toward existing loan EMIs and fixed financial obligations — used by banks to determine how much additional loan you can service.

Definition

FOIR (Fixed Obligation to Income Ratio) is a key loan eligibility metric used by Indian banks and NBFCs to assess how much of a borrower's monthly income is already committed to existing debt repayments. It measures the proportion of your monthly income going toward all existing loan EMIs (and sometimes credit card minimum dues) against your net monthly income.

FOIR is also called the Debt-to-Income (DTI) Ratio in international banking. It answers the lender's question: "After paying all existing obligations, how much income does this person have left to service a new loan?"

If FOIR is 35% and the bank's maximum is 50%: The new loan's EMI can be at most 15% of monthly income.

Banks use FOIR alongside credit score and LTV to determine both loan eligibility and sanctioned amount.

Formula

FOIR = (Total Monthly Fixed Obligations / Net Monthly Income) × 100

Maximum new EMI = (Maximum FOIR% − Current FOIR%) × Net Monthly Income

New Loan Amount = Maximum new EMI × [1 − (1 + r)^(−n)] / r

(Where r = monthly rate, n = loan tenure in months — the standard annuity PV formula)

Worked Example

Sanjay earns ₹1,20,000/month net. He has:

  • Existing personal loan EMI: ₹12,000/month
  • Car loan EMI: ₹8,500/month

Current FOIR = (₹12,000 + ₹8,500) / ₹1,20,000 = 17.08%

He applies for a home loan. Bank's maximum FOIR = 45%.

Maximum new EMI = (45% − 17.08%) × ₹1,20,000 = 27.92% × ₹1,20,000 = ₹33,504

Maximum home loan (at 9% p.a. for 20 years):

  • n = 240 months, r = 0.75%/month
  • Loan = ₹33,504 × [1 − (1.0075)^(−240)] / 0.0075 = ₹37.15 lakh

If Sanjay were to close the personal loan (saves ₹12,000/month):

  • New FOIR = 7.08%
  • New maximum EMI = ₹45,504
  • Maximum home loan = ₹50.5 lakh — 36% more!

Use the loan eligibility calculator to compute your maximum loan based on FOIR.

Key Things to Know

  • FOIR vs LTV — different constraints: FOIR limits how large a loan you can afford (income-based). LTV limits how much the bank will lend relative to the property value (collateral-based). Your maximum loan is the lower of the FOIR limit and the LTV limit. A buyer with excellent income (low FOIR) but buying an expensive property near its LTV ceiling is constrained by LTV, not FOIR.
  • Closing small loans before applying: If you have a personal loan with 6 months remaining (₹10,000 EMI × 6 months = ₹60,000 left), prepaying it before your home loan application costs ₹60,000 but may increase your home loan eligibility by ₹10–15 lakh (depending on tenure and rate). The ROI on strategic loan prepayment before a home loan application can be extraordinary.
  • Credit card minimum due counted: Even if you clear your credit card in full every month, banks often count 5% of your statement balance as a fixed obligation for FOIR purposes. A ₹1 lakh credit card limit with ₹80,000 utilisation = ₹4,000 counted as monthly obligation. Reduce credit card utilisation before loan applications, or request a limit increase (which reduces utilisation without changing the counted obligation).
  • Rental income and FOIR: If you earn rental income from a property, banks typically count 70–75% of stated rental income as income (after a haircut for vacancies). This can improve FOIR significantly. A ₹25,000/month rental income adds ₹17,500–₹18,750 to the qualifying monthly income — potentially increasing home loan eligibility by ₹15–20 lakh.
  • Joint application strategy: Adding a co-applicant (spouse, parent) with their own income significantly improves FOIR. Banks add both incomes for the income denominator while the obligations remain the same (unless the co-applicant also has existing EMIs). This is why couples applying jointly typically qualify for significantly larger home loans than either could individually.

Related Calculators

Loan Eligibility Calculator →Calculate the maximum loan amount you are eligible for based on your monthly income, existing EMIs, interest rate, and FOIR. Works for home, car, and personal loans.
Home Loan EMI Calculator →Calculate your home loan EMI, total interest, and amortisation schedule instantly. Built for Indian borrowers — results in seconds.
Personal Loan EMI Calculator →Calculate your personal loan EMI, total interest, and repayment schedule instantly. Covers all unsecured personal loans in India.

Related Terms

Credit ScoreCIBIL Credit ScoreLTVLoan-to-Value RatioEMIEquated Monthly Instalment
Frequently Asked Questions
What is the ideal FOIR for getting a home loan approved?
Most Indian banks and NBFCs prefer FOIR below 40–50% for home loan applicants. Premium lenders (SBI, HDFC) typically cap at 40–45% FOIR. Some NBFCs and smaller banks go up to 55–60% FOIR for applicants with strong credit profiles. Below 30% FOIR is excellent and gives you maximum negotiating power. Above 50% FOIR significantly reduces the loan amount sanctioned and may attract higher interest rates.
What counts as a 'fixed obligation' in FOIR?
Fixed obligations include: existing home loan EMIs, car loan EMIs, personal loan EMIs, education loan EMIs, credit card minimum due amounts (typically 5% of statement balance is counted), and any other regular financial commitments. EPF, SIPs, insurance premiums, rent paid, and living expenses are generally NOT counted as fixed obligations for FOIR purposes — only loan-related commitments are included.
How can I improve my FOIR to qualify for a larger loan?
To improve FOIR: (1) Prepay or close existing small loans (personal loans, car loans) before applying — this directly reduces the obligation count. (2) Add a co-applicant with income and no existing debt — their income is added to the calculation, lowering combined FOIR. (3) Ask for a longer loan tenure — lower monthly EMI on the new loan reduces FOIR. (4) Clear credit card dues — the minimum due (even if you pay in full) is counted in obligations.
Is FOIR calculated on net or gross income?
Banks typically calculate FOIR on net monthly income (in-hand salary after tax and statutory deductions). For salaried employees, this is the take-home salary shown in salary slips. For self-employed individuals, the average of last 2–3 years' net profit after tax (from ITR) is used as monthly income. Some banks use gross income (before TDS) — always clarify which basis the bank uses to avoid surprises in eligibility calculation.
Is FOIR the only factor in loan eligibility?
No. Loan eligibility depends on multiple factors: FOIR (primary income-based criterion), credit score (minimum 700–750 for good terms), employment stability and type (salaried at reputed company vs self-employed), age (remaining loan tenure must end before retirement age), property value and LTV (for home loans), and banking relationship. FOIR determines the maximum EMI you can service; other factors determine whether the lender will approve.