FOIR (Fixed-Obligation to Income Ratio)
FOIR (Fixed-Obligation to income ratio) is a method by which a person’s eligibility for availing a loan is determined. It is used to evaluate an applicant’s any other loan pending that he is obliged to pay while applying for a new one. It does not take into account his fixed obligations like LIC premiums, Professional tax, charity works, Provident funds, etc. Excluding all these statutory deductions the applicant’s ability to repay his loan interest based on his left out salary is evaluated.
How to calculate FOIR?
For example consider that a man’s monthly income is around Rs 60,000.
Suppose, for car loans, he has to pay a monthly installment of Rs 9000 and for personal loan Rs 7500 per month. Also some amount would add up to your LIC premiums and PF. Then he likes to take a new housing loan with the installment of Rs 10,000 per month.
Then the FOIR is calculated by adding up all the monthly installments that he pays for other loans and it is subtracted from 50% of his salary.
i.e., 30,000 – (9000 + 7500) = Rs. 13,500
This 13,500 would be sufficient for him to pay installments of 10,000 per month.
Thus a loan will be sanctioned to him through a bank.
Note : Apart from FOIR, banks will check for the credit score (CIBIL) and other factors, depending on each bank’s loan approval policies.
