Know Your FOIR To Avoid Rejection On Your Personal Loan - Loan Trivia


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Tuesday 24 August 2021

Know Your FOIR To Avoid Rejection On Your Personal Loan


Have you heard of the term ‘FOIR’ while applying for the personal loan? Are you aware of the FOIR meaning? If not, then you can find this short post helping you know the basics of the FOIR meaning

FOIR Meaning 

Lenders have different eligibility conditions that they consider while processing the personal loan application of borrowers. And one of them is FOIR. FOIR stands for the fixed obligation to income ratio. It is a famous eligibility parameter that lenders use to compute the creditworthiness of the loan applicant. FOIR is also called the debt-to-income ratio. 

If you are applying for a personal loan, and don’t want to face rejection, then you should know your FOIR. FOIR considers your income and obligations, including loan EMIs. 

FOIR may vary from lenders to lenders, but it should be between 40% and 50%  

FOIR calculation = Sum of existing fixed obligations/Monthly income x 100 

Let’s try to understand the FOIR by the below easy example! 

Let’s consider that your current obligations are 20,000 and your income is Rs.30,000. In this case, 20,000/30,000 x 100 = 66.6. 

Hence, your FOIR is 66.6 – much higher than the limit of 50% 

It shows that a large part of your income is going towards your obligations, and any further allowance may lead to defaults. 

Thus, your repayment aptitude is measured less, and your personal loan application is rejected. 

Thus, you should try paying off some of your obligations in full. It will increase your FOIR and help you get loan approval from top lenders in India. You are now aware of the FOIR meaning, and that may help you while approaching your next loan. 

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