What is FOIR - FOIR meaning in banking & how it is calculated
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Summary: FOIR (fixed obligation to income ratio) is an important factor that banks look at before the sanction a loan. Explore everything about FOIR in detail here.
FOIR: Does It Affect Your Personal Loan Approval?
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Several factors are considered while approving a loan, especially in the case of Personal Loan approval. Each bank sets specific parameters based on which the eligibility of the applicant is checked. Fixed Obligation to Income Ratio (FOIR) is one such parameter.
In this article, let us dive further into this ratio and learn how it impacts a Personal Loan application.
How is FOIR calculated?
FOIR calculation is simple. The formula totals the monthly debts of the applicant, including existing EMI payments, Credit Card bill amounts, rent, and living expenses. This sum is divided by the gross total monthly income of the applicant and multiplied by 100.
FOIR = (Sum of total debt/totally monthly income) x 100
Note: FOIR calculation does not take tax deductions and contributions to Fixed Deposits and Recurring Deposits into consideration while calculating the total debt amount.
Now lets us understand how FOIR is used to determine the EMI repayment capacity of an applicant with the help of an example.
For instance, the monthly income of an applicant is INR 60,000. And his/her FOIR is 30% that means he can pay INR 30,000 to clear his debts every month. Now, if he has existing EMI Payments of INR 5,000 and INR 4,000, respectively. His total debt month will be INR 9,000.
After clearing the EMI payments, the disposable income at hand will be INR 21,000. The eligibility of the applicant to pay the current EMI loan amount will be calculated, keeping this disposable income in mind.
| E1. MULTIBUREAU RESULT |
| Customer Name | Applicant Type | Cibil Result | Cibil Score | Equifax Result | Equifax Score | Experian Result | Experian Score |
| XYZ Party | Applicant | MATCH | 731 | MATCH | 696 | NOT APPLICABLE |
| E2. MULTIBUREAU RESULT |
| Customer Name | Applicant Type | HighMark Result | HighMark Score | HighMark Overlap Result | HighMark Overlap Score | Merged Bureau Score |
| XYZ Party | Applicant | MATCH | 510 | NOT APPLICABLE | 565, D-C |
| INCOME DETAILS | |||
| Monthly Gross Income | 57,006.00 | Net Monthly Income | 57,006.00 |
| Total Obligations | 0.00 | FOIR | 74.56 |
| Rental Obligation | 0 |
REJECT - FOIR NORM NOT MEET FOIR TO BE- 50 FOIR - 74 MLB D-C, SUM TO OF BAD FLAGS EQUAL TO 3 , CC*
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Documents Required for a Personal Loan:
- Application Form and a recent photograph
- Identity proof (passport, voter ID, PAN card, driving license)
- Address proof (ration card, telephone bill, electricity bill, rental agreement, driving license, passport, bank statement, passbook)
- Age proof (PAN card, passport)
- Bank statement for the last 6 months
- Salary slips of the past 3 months and appointment letter (for salaried applicants)
- For self-employed, income statements and other financial documents for the last 2 years attested by a Chartered Accountant
- For SME, audited financials for the past 2 years
Unsecured MSME Business Loan
Loan Eligibility Criteria Documentation Required
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