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    FOIR In Banking: Avoid Loan Rejection

    Are you applying for FOIR in Banking? Well, you need to be aware of the rules and regulations that you can easily avoid being rejected for loans. Even when you can pay off a loan, it is necessary to consider the FOIR to get the housing or mortgage loan. 

    All the banks and financial institutions are focused on following strict eligibility criteria for approving loans. You will never get a loan if you do not meet the criteria. One of the most important things to note about FOIR calculation is that you will need to consider the small aspects. 

    Before approving a loan for an individual, these banking institutions make it a point to check their capacity for repaying the loan. They further calculate this depending on the equated monthly instalment amount that the person is capable of paying. The banking institutions usually take a look at your personal credit history, current assets, and liabilities to ensure that you receive proper financing. Furthermore, they also make it a point to check the individual’s financial details for extra information. All these further help in FOIR calculation. 

    What is FOIR? 

    FOIR full form refers to the fixed obligation-to-income ratio. This is one of those parameters that can play an important role in calculating the loan eligibility as well, depending on the applicant. In many cases, the FOIR full form in banking may also be known as the debt-to-income ratio. 

    When you calculate FOIR in banking, the banking and financial institutions will take care of the loans’ income and instalments. Your current loan amounts will also be considered. This is beneficial for equated monthly instalment for the prospective Loan, which will be under consideration. 

    FOIR calculation= (sum of the existing loans or fixed obligations/ total monthly income) * 100. 

    If you don’t know how to calculate your FOIR, you need to insert the details, and the experts will eventually take care of it. FOIR is one of the most important aspects of baking. It calculates or rather takes into consideration all your existing obligations like provident funds, taxes, and more. All your loans are calculated as well, such as rents. 

    The ideal amount may be beneficial for considering 40-50% of the individual’s income. It also helps to determine the net worth of the individual. People with a high net worth may need to calculate FOIR for up to 65-70%, and this would entirely depend on the lender policies. Different factors play an important role in determining the approval of FOIR in banking

    What Is The Process Of FOIR Calculation? 

    According to experts, all obligations are extremely crucial for FOIR calculation. Some of the common or prominent aspects to be considered include the following.

    • Credit card bills
    • Rent payments
    • Living expenses
    • Debt obligations
    • Existing EMI

    These may also be valid for certain deductions like taxes and contributions, especially that of RD and FD. It is necessary to determine the fixed monthly obligation to find the accurate details. Nonetheless, it is necessary to consider FOIR in banking to avoid the risk of excessive finance straining

    Does FOIR In Banking Affect Personal Loan Approval?

    All banking and financial institutions will take care of your FOIR before helping you get the financial Loan. Personal loans may be subjected to various risks, one of the most important ones being the absence of collateral payment. The FOIR of the applicant says a lot about the person’s ability to make EMI payments and more. The lenders need to take special care while paying off the personal loan eligibility to determine the applicants’ benefit. 

    Home Loan in India
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    It is advisable to keep a check with the fixed obligations for extra advantages. Whenever you apply for the new Loan, you need to check that it is not more than 50% of the overall income. The FOIR of the personal Loan will further vary significantly. 

    If you maintain a low FOIR in banking, it will impact your finances too-

    • Helps in the reduction of total liabilities. 
    • Increases disposable income. 
    • Helps to boost repayment capacity. 

    Moreover, it will depend on various factors, such as the creditworthiness of the individual. This would also help them get the loan approval easily. 

    How To Reduce FOIR?

    FOIR in banking can be reduced significantly by the application of different techniques. You need to keep a check with the factors from your end for the reduction of FOIR. These usually include the following.

    Joint Loan

    Joint home loan with Spouse Pros and Cons
    Image Source – Be Money Aware Blog

    A joint Loan is extremely crucial. If you want a reduction in FOIR, you need to apply for a joint loan with a parent, spouse, or sibling. This increases the chances of getting a loan since paying the EMI will be divided between the two. 

    Timely payment of debts

    Late debt payments are risky and can affect your credit history too. It is crucial to work towards maintaining a proper credit history and paying off the loans. You should pay your EMI, draft repayments, and all other aspects in time. 

    Avoid multiple loans

    One of the most common mistakes that people tend to make is taking multiple loans at one time. The lenders are interested in lending money to people who are careful in managing their finances. If the borrower has too many loans, it is a clear sign that the respective individual cannot manage his finances. Hence, not only the FOIR increases but the chances of getting the Loan decreases too. 

    Low Credit Utilisation Ratio

    Your credit utilization ratio is extremely crucial and can play an important role in determining the maximum credit that will be made available to you. You should keep your credit utilization ratio to 30% before applying for the Loan. If the credit utilization ratio is high, the company is liable for rejecting your personal Loan. 

    Don’t switch jobs 

    Many individuals are in the habit of switching jobs frequently. While it may seem beneficial for you, it is not. It only creates a negative image for your personal loans, and hence, they will get affected. 

    Is FOIR Important For First-Time Homebuyers? 

    Tips to use all the tax benefits that are available on home
    Image Source – Business Today

    If you have low FOIR, it is beneficial because it acts as a sign that you can pay the loans in time. This will further play an important role in helping you pay back your EMI on time. If your monthly obligations are low, you will be able to save a significant sum of money. Hence, you can easily pay your home loan. 

    This is highly beneficial for first-time home buyers since you will pay off the loans without any issues in the future. As a result, most banking and financial institutions focus on providing loans to individuals with low FOIR than those who don’t. This also ensures that they can easily pay off the loans. 

    One of the main reasons why banks do FOIR calculation is because it helps them find a more trustworthy candidate. This also helps to explain the capacity of an individual to pay off the loans. The banks are mostly worried about how to recover their loans. Hence, granting loans to trustworthy individuals becomes easy for them. 


    The bank usually sends the individual’s request for loans and credit card to the credit bureau. All of these are recorded and reflected in your card. So, make sure to maintain a low FOIR in banking to increase credit score and get loans easily. 

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    Josie Patra
    Josie Patra is a veteran writer with 21 years of experience. She comes with multiple degrees in literature, computer applications, multimedia design, and management. She delves into a plethora of niches and offers expert guidance on finances, stock market, budgeting, marketing strategies, and such other domains. Josie has also authored books on management, productivity, and digital marketing strategies.

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