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  • Fixed Obligations to Income Ratio (FOIR) is Rated as "Great!" by 92905 Users

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    Fixed Obligations to Income Ratio (FOIR)

    All financial institutions including banks have an array of very stringent eligibility criteria before sanctioning a loan. When a person is applying for a personal loan or any other loan facility, he or she has to go through a rigorous amount of multifaceted checks before the loan is finally disbursed. This is due to the fact that the possibility of repayment of a loan is an important measure that determines whether an individual is eligible for the loan or not. If this parameter is not validated, there are chances that the bank might incur losses due to non-repayment of the loan offered to a candidate attributing to non-performing assets or bad debts. In order to avoid such conundrum, financial organisations perform through background checks on the applicant including his or her income documents, credit repayment history, assets, financial liabilities, and other components that can affect the loan repayment ability of the individual.

    There are 3 deciding factors or ratios that the banks calculate using the net income of a person to determine his or her eligibility for a loan:

    1. Fixed obligation to income ratio (FOIR)
    2. Loan-to-value ratio (LTV)
    3. Instalment income ratio (IIR)

    What Are the Parameters For Loan Approval?

    While there are multiple parameters that are taken into account by a bank before approving a personal loan and various banks have different set of eligibility criteria, the most crucial one is the loan repayment ability of an individual. In order to ensure that the loan paid back, the bank carefully considers the following parameters of an applicant:

    • The age of the candidate at the time of loan application
    • The qualification of the applicant
    • The individual’s fixed and variable income
    • The work experience of the individual to ensure a regular source of income
    • Reputation of the organisation at which the applicant currently works at
    • Tax payment history
    • Outstanding loans of the applicant
    • Financial assets and liabilities
    • Loan repayment tenure
    • The applicant’s CIBIL score

    What is Fixed Obligations to Income Ratio?

    Fixed Obligations to Income Ratio (FOIR) is the parameter used by banks and other financial organisations to determine the eligibility for a loan of an individual. The FOIR of a person is derived by taking into account all the fixed monthly obligations that he or she should meet without including the statutory deductions such as Provident Fund, Investment Deductions, or Professional Tax. While additional expenses such as rent can also be considered as fixed obligation depending on the level of income, the FOIR reflects the disposable income of a candidate that can be used to pay off his or her debts - existing and new. Therefore, the loan eligibility of an individual highly depends on his or her FOIR.

    The formula for calculating the FOIR of a person is given below:

    FOIR = (Summation of All Existing Obligations/Net Monthly Salary) * 100

    Calculation of Personal Loan Eligibility With FOIR

    If the Fixed Obligations to Income Ratio of an individual is 50%, it means that a maximum of 50% of the monthly income of the person is assumed to be his or her living expenditure before the bank disburses a personal loan, home loan, car loan, etc. Therefore, the remaining amount of the income will be considered by the bank in order to determine the loan amount that the individual should be eligible for.

    This can be explained further with the following example:

    A person has a monthly income of Rs.50,000. Considering 50% as fixed obligations, the individual can pay up to Rs.25,000 towards his or her debts. If he or she has 2 existing loans with EMIs of Rs. 5,000 and Rs.6,000 respectively, the candidate is currently paying a total EMI of Rs.11,000. Therefore, the disposable income for the person is Rs.14,000. If this individual applies for a personal loan, he or she will be able to avail a maximum loan amount subject to the remaining monthly disposable amount, i.e. Rs.14,000.

    A candidate with low FOIR is desirable while applying for a personal or any other type of loan. This is due to the fact that when a person has a high Fixed Obligations to Income Ratio, he or she has less amount of funds left as disposable income after paying the existing EMIs. If this person is disbursed another loan, there are high chances that he or she will not be able to pay the EMI for repayment of the new loan. Thus, this will lead to high credit risk and the chances of banks denying a loan application will also be higher.

    Do All Banks Have a Standard FOIR?

    While the margin for Fixed Obligations to Income Ratio differs from lender to lender and varies in each scenario, the required FOIR of an individual for loan eligibility for most of the banks ranges from 40% to 60%. However, this can go up to 65% to 70% for a customer with an extremely high net worth.

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    What Should I Do If My FOIR is High?

    If you are worried about your loan approval since your Fixed Obligations to Income Ratio is higher than the concerned bank’s margin then you can apply for a loan with another working candidate. In that scenario, the burden of the payment of EMI will be divided. For instance, a married working couple can easily share the monthly payments, thus, will have better chances of loan approval if they opt to avail a loan jointly.

    Personal Loan Reviews

    • Citibank Personal Loan
      "Not satisfied"
      0.5 2.0/5 "Expected more"
      I have taken my personal loan with CITI bank 10 years back. I have a faced a major issues with EMI deductions and i have even raised a complaint also then the step was taken but i have went through a lot of issues due to that . My Credit score was also affected which was very disappointing . I have taken 50,000 and the interest rate was satisfactory .
      Was this review helpful? 2
      , hyderabad
      Reviewed on Jul 20, 2018
    • Kotak Personal Loan
      "Good service"
      0.5 3.0/5 "Satisfactory"
      The process in getting the loan had been very good and verification process had been very simple and easy. The loan amount which they had provided had been satisfactory which was about 2,20,000 and the interest rate with them also had been okay which was 18%. Overall it had been a good experience.
      Was this review helpful? 1
      , mumbai
      Reviewed on Jul 20, 2018
    • Bank Bazaar Personal Loan
      "Satisfactory"
      0.5 4.0/5 "Great!"
      My experience was quite satisfactory with bank bazaar . This is my first experience and there are no complaints.The website is very user friendly and easy to navigate . The web portal's accuracy and speed is good therefore I would recommend this site to all.
      Was this review helpful? 2
      , hyderabad
      Reviewed on Jul 20, 2018
    • HDFC Bank Personal Loan
      "Very Good Service"
      0.5 4.0/5 "Great!"
      It had been a very good experience with this Personal loan and the process in getting this loan had been smooth and easy. The loan amount which they had provided had been satisfactory and the interest rate with them had been nominal when compared with the market rate. The customer support of them and their staff responses had been good while the processing of the loan.
      Was this review helpful? 2
      , hyderabad
      Reviewed on Jul 20, 2018
    • HDFC Bank Personal Loan
      "Very good"
      0.5 4.0/5 "Great!"
      My personal loan was taken with HDFC Bank. The loan amount was 3 lakhs and the interest rate was stayfscatory . The process was very smooth and there is no processing fee here. I completely satisfied with the service here and i liked the coordination also., The loan was approved on time so I would like tor recommend to others.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Jul 20, 2018
    • Bank Bazaar Personal Loan
      "Awesome Service"
      0.5 5.0/5 "Blown Away!"
      I've been using the BankBazaar platform for a while. I never faced any issues with their services. I've applied for a personal loan via Bankbazaar and the whole application and the documentation process was smooth and hassle free.
      Was this review helpful? 1
      , bangalore
      Reviewed on Jul 20, 2018
    • Citibank Personal Loan
      "Very good service"
      0.5 5.0/5 "Blown Away!"
      I've taken a personal loan from the Citi bank for Rs. 5.7L for 4 years. It was very good, The interest was normal. I got the loan amount with in a week. There was a bank strike other than that there were no issues during the loan application.
      Was this review helpful? 2
      , bangalore
      Reviewed on Jul 20, 2018
    • Bank Bazaar Personal Loan
      "Very good service"
      0.5 5.0/5 "Blown Away!"
      I've been using the BankBazaar platform for a while. I applied for a ,personal loan via BankBazaar. It was very good, the customer support follow up was also very good. BankBazaar is a convenient platform to apply for various financial products online. I even recommended BankBazaar to some of my friends.
      Was this review helpful? 1
      , pune
      Reviewed on Jul 20, 2018
    • HDFC Bank Personal Loan
      "Better Service"
      0.5 4.0/5 "Great!"
      I took a personal loan from the HDFC Rs. 3.6 Lacs for 5 years. It was amazing, I applied directly but rejected the application. When I applied online I got the loan amount with in 5 days. The interest rate is normal when comparing with the other banks
      Was this review helpful? 0
      , pune
      Reviewed on Jul 20, 2018
    • HDFC Bank Personal Loan
      "Good service"
      0.5 3.0/5 "Satisfactory"
      The process in getting this loan had been smooth and easy, where the loan amount which they had provided also had been satisfactory as well. The interest rate which they where charging had been nominal and there has not been any processing fee or any sort of extra charges which they had charged so far. Overall it had been a good experience with them.
      Was this review helpful? 1
      , chennai
      Reviewed on Jul 20, 2018
    • HDFC Bank Personal Loan
      "Very good service"
      0.5 4.0/5 "Great!"
      I took a personal loan from the HDFC bank for 2.5 lacs, it was a good experience, the interest was lower. I got the loan amount2-3 days. There were some issues with the address verification. Overall it has been a very good experience in taking a personal from the HDFC bank.
      Was this review helpful? 0
      , kurnool
      Reviewed on Jul 20, 2018
    • Bank Bazaar Personal Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I've been using the BankBazaar services for a while. They offered Excellent service, I got the loan with in 2 days. The customer support follow up was also good during the application. I never faced any issues during the application.
      Was this review helpful? 2
      , kurnool
      Reviewed on Jul 20, 2018
    • Fullerton Personal Loan
      "Very good service"
      0.5 4.0/5 "Great!"
      I took a ,personal loan from the Fullerton Rs. 2Lacs for 5 years. The loan experience was good, rate of interest is high. The whole application and the documentation process was smooth and hassle free. I got the loan amount quickly.
      Was this review helpful? 1
      , kurnool
      Reviewed on Jul 20, 2018
    • HDFC Bank Personal Loan
      "Good Service"
      0.5 5.0/5 "Blown Away!"
      I took a personal loan from the HDFC bank for 2 lacs, I applied at the branch and it was also pre-approved . There were no hassles during the application and documentation. It was a smooth personal loan experience. The interest rate was also nominal.
      Was this review helpful? 0
      , haridwar
      Reviewed on Jul 20, 2018
    • Bank Bazaar Personal Loan
      "Good Service"
      0.5 4.0/5 "Great!"
      I've been using the BankBazaar platform for a while. The response was good. The customer support follow up was also good during the application process. I never faced any issues during the application and the documentation. BankBazaar is a convenient platform to compare and choose various banking products.
      Was this review helpful? 0
      , haridwar
      Reviewed on Jul 20, 2018
    • Bank Bazaar Personal Loan
      "Good"
      0.5 3.0/5 "Satisfactory"
      I have taken my personal loan via BANK BAZAAR . The customer service and responses was up to the mark. The website is very user friendly and easy to understand but few information which is given on the website is not consistent which can be worked on .
      Was this review helpful? 0
      , bangalore
      Reviewed on Jul 20, 2018
    • HDB Financial Services Personal Loan
      "Very good"
      0.5 4.0/5 "Great!"
      My personal loan was taken with HDB FINANCE. The loan amount was 3,30,000 and the interest rate was satisfactory and the tnrue period was 3 years,. I had a very smooth process here but the documentation was but tedious sine they requested lot of documents to submit but the process was very nominal. They have sanctioned the loan with the committed time.
      Was this review helpful? 1
      , bangalore
      Reviewed on Jul 20, 2018
    • HDFC Bank Personal Loan
      "Normal service"
      0.5 4.0/5 "Great!"
      The process in getting this personal loan had been a little slow and the process has took some delay. The loan amount which they had provided had been satisfactory but the interest rate has been a little high when compared with the market rate. I have taken this loan for the Home Renovation.
      Was this review helpful? 0
      , chennai
      Reviewed on Jul 20, 2018
    • HDFC Bank Personal Loan
      "Average Service"
      0.5 3.0/5 "Satisfactory"
      I took a personal loan from the HDFC bank for 2.3 lacs, the experience is good, The interest rate was normal. I got the loan amount with in 7 working days, the customer support follow up was also very good. it was a hassle free loan experience with the HDFC bank.
      Was this review helpful? 1
      , mumbai
      Reviewed on Jul 20, 2018
    • Bank Bazaar Personal Loan
      "Average Service"
      0.5 3.0/5 "Satisfactory"
      I've been using the BankBazaar platform for a while. The service was good, customer support was good. I got the loan pretty soon. BankBazaar is a convenient marketplace to apply for for various financial products online.
      Was this review helpful? 2
      , mumbai
      Reviewed on Jul 20, 2018
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