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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

    • Bank Bazaar Personal Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      The bank bazaar process is excellent and I have got good service from the bank bazaar team. The customer support service and the response is good from the bank bazaar. I have the bank bazaar mobile application which is easy to use and user friendly.
      Was this review helpful? 0
      , new delhi
      Reviewed on May 18, 2018
    • Kotak Personal Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      The rate of interest and the charges were quite high with the KOTAK MAHINDRA BANK persona loan process and I have got the loan amount within a week time. The customer support service and the response is good from the Kotak mahindra bank. I would say I got excellent service.
      Was this review helpful? 0
      , new delhi
      Reviewed on May 18, 2018
    • Bank Bazaar Personal Loan
      "Excellent service"
      0.5 4.5/5 "Excellent!"
      The bank bazaar personal loan service was excellent and I have got the loan amount on time via bank bazaar. I know bank bazaar for more than 2 years. The customer support service and the response is good from he bank bazaar team. I use the bank bazaar mobile application which is easy to use.
      Was this review helpful? 0
      , bangalore
      Reviewed on May 18, 2018
    • HDFC Bank Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have opted the personal loan from the HDFC bank. The promised rate of interest was not approved and I am not happy about the interest rate. I have got the loan amount within a week time. The customer support service and the response is good with the HDFC bank.
      Was this review helpful? 0
      , bangalore
      Reviewed on May 18, 2018
    • HDFC Bank Personal Loan
      "Good Service"
      0.5 5.0/5 "Blown Away!"
      I took a personal loan of 190000 and their interest rate is flexible as per customer requirements . I got the loan with in 3 days, the documentation part was also easy and the loan amount was credited directly to my account.
      Was this review helpful? 0
      , chennai
      Reviewed on May 18, 2018
    • Bank Bazaar Personal Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      The response is quite good from the bank bazaar team. I know bank bazaar for the past 1 year, I use the bank bazaar mobile application while applying fort the personal loan which is easy to use and user friendly. I would say I got good service from bank bazaar.
      Was this review helpful? 0
      , visakhapatnam
      Reviewed on May 18, 2018
    • HDFC Bank Personal Loan
      "Average service"
      0.5 5.0/5 "Blown Away!"
      I got the personal loan from the HDFC bank within 5 to 6 days of time. The customer support service and the response is good from he HDFC bank. The required loan amount has been disbursed and I am satisfied with it. The rate of interest and the charges are high with the HDFC personal loan.
      Was this review helpful? 0
      , visakhapatnam
      Reviewed on May 18, 2018
    • Axis Bank Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      My personal loan experience was good with AXIS bank, the loan amount was for Rs 5 lakhs with nominal interest rate when compared to other banks. The process was quick and i received my loan amount on time. There are no charges on preclosure and the tenure period is 4 years.
      Was this review helpful? 0
      , mumbai
      Reviewed on May 18, 2018
    • Bank Bazaar Personal Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      The bank Bazaar was quite good and I have got the loan on time via bank bazaar ,. The customer support service and the response is good from the bank bazaar they made very good follow up . Their executives explained the product in a very good way.
      Was this review helpful? 0
      , tiruchirapalli
      Reviewed on May 18, 2018
    • HDFC Bank Personal Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      The HDFC bank personal loan service was quite good and I have got the loan amount within 2 days of time. The customer support service and the response is good from the HDFC bank. The rate of interest and the charges are average here with the HDFC bank personal loan.
      Was this review helpful? 0
      , tiruchirapalli
      Reviewed on May 18, 2018
    • Bank Bazaar Personal Loan
      "Perfect srevice"
      0.5 4.0/5 "Great!"
      I have got good service from bank bazaar in regards to my personal loan application. I know bank bazaar for more than 23 years. The customer support service and the response is good from the bank bazaar . I have used the bank bazaar website while applying for the personal loan which is easy to use.
      Was this review helpful? 0
      , mumbai
      Reviewed on May 18, 2018
    • Aditya Birla Finance Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      The personal loan process took time with the ADITYA BIRLA FINANCE LIMITED . They have disbursed the loan amount within 2 weeks of time. The required loan amount has been given and I am satisfied with it. the rate of interest and the charges are average here.
      Was this review helpful? 0
      , mumbai
      Reviewed on May 18, 2018
    • Axis Bank Personal Loan
      "Good Service"
      0.5 5.0/5 "Blown Away!"
      I took a personal loan from the Axis. The whole application process was easy and hassle free. It took just 6 working days to disburse the loan amount to my account. The documentation was done digitally which was easy and convenient. Th EMI is paid online ..
      Was this review helpful? 0
      , bangalore
      Reviewed on May 18, 2018
    • Bank Bazaar Personal Loan
      "Very good service"
      0.5 5.0/5 "Blown Away!"
      The service was quite good from the bank bazaar team in concern to my personal loan application. I know bank bazaar for more than 3 years. The customer support service and the response is good from the bank bazaar team. I use the bank bazaar mobile application.
      Was this review helpful? 0
      , chennai
      Reviewed on May 18, 2018
    • Tata capital Personal Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      Got the better service from the TATA CAPITAL in regards to my personal loan application. I have got the loan amount within 2 days of time. The customer support service and the response is good from the tata capital . The rate of interest and the charges are average.
      Was this review helpful? 0
      , chennai
      Reviewed on May 18, 2018
    • Axis Bank Personal Loan
      "Good service"
      0.5 2.0/5 "Expected more"
      The Axis bank personal loan service is quite average and they were ready to offer me the loan but the requested loan amount has not been approved , so that was the reason I have closed the loan application. the customer support service and the response is average here.
      Was this review helpful? 0
      , mettur
      Reviewed on May 18, 2018
    • HDFC Bank Personal Loan
      "Average service"
      0.5 1.0/5 "Really Bad"
      I am an existing customer to HDFC ban but still , I haven't got the loan from them and they have rejected my personal loan application saying that my credit score was low. the customer support service and the response is average from the HDFC bank.
      Was this review helpful? 0
      , mettur
      Reviewed on May 18, 2018
    • Bank Bazaar Personal Loan
      "Very good service"
      0.5 5.0/5 "Blown Away!"
      I use the bank bazaar for more than 2 months. The customer support service and the response is excellent from the bank bazaar. I have used the bank bazaar mobile application while applying for the personal loan which is easy to use and user friendly.
      Was this review helpful? 0
      , mettur
      Reviewed on May 18, 2018
    • ICICI Bank Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I got the personal loan amount within a week time. The customer support service and the response is very good from the ICICI bank. The rate of interest and the charges are average with the ICICI bank when compared with others. The loan amount was low with the ICICI bank .
      Was this review helpful? 0
      , mettur
      Reviewed on May 18, 2018
    • Citibank Personal Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have taken this loan almost seven years back for my personal use. The services which they have provided had been good. It was a paperless approval and i had submitted the documents online and it was an easy and smooth process. The rate of interest was nominal and also the loan amount was satisfactory.
      Was this review helpful? 0
      , bangalore
      Reviewed on May 18, 2018
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