FOIR Calculator

What is FOIR and Why Is It Important?

FOIR, whose full form is Fixed Obligations To Income Ratio - is used by financial lending institutions like banks and NBFCs to calculate the Affordability of the loan of the applicant.

When you apply for a loan, these lending institutions check your affordability of loan through your repayment capacity by analyzing your income – Can you afford the loan? Can you repay the loan?

Your income (either by salary or by business) has two characteristics:

(i) Purchasing Power – what you want to buy.

(ii) Affordability – cost of living which you must pay.

Banks/NBFCs look at the latter characteristic of your income through dividing it by 2.

Cost of living should not exceed 50% of your income. All your obligations like rent, existing loans EMIs, credit card bills, etc. must be below 50% of your income. And, all these obligations are the cost you are paying to sustain your standard of living. If all of your monthly obligations are below 50% of your net income, then you are eligible for loan and for the bank you could afford the cost of new obligation.

You might be an income earner, a housewife, or a student. But by understanding the concept of income you can manage your income in better ways. You can teach your children how to manage their income effectively.

It can help you in your financial planning of future. And, when you apply for a loan be it personal loan/home loan/business loan or any other, you will be familiar with which part of your income is going to make the difference in final decision making of loan approval process by banks/nbfcs.

Nature of Life is Duality – if there is day, then there is night. If there is summer, then there is winter. If there’s pain, then there’s also pleasure. This principle of duality also exists in financial matters in the following way–

If there is income, then there is out-go.

All obligations are out-go.

Lending institutions check these out-go when you submit your documents with them by analyzing your bank statements.

Calculators are not just to calculate but to bring financial awareness and education to the user consciousness.

All banks/NBFCs do not have the same standard FOIR for loan approval. Calculation/margin of FOIR will be different for someone who has an income of Rs. 35,000/- and different for another who has income of Rs. 75,000/-. Our calculator allows you to calculate every type of salary/income segment.

Benefits of Low FOIR:

✧ The total number of liabilities are brought down – higher chances of loan approval.

✧ Your repayment capacity is improved, which makes you more likely for loan approval.

✧ Your disposable income is increased – you can afford a loan.

50% part of your income should be used for fixed monthly obligations. By using FOIR calculator, you can check for yourself or any of your earning family members/friends/colleagues how they are using their income. Are their monthly obligations more than 50% of their monthly income? How are they making use of their income? Are they eligible for a personal loan? Or do they need to adjust their spending according to the FOIR calculator results? Is their income spending loan-friendly? If in near future, you or they need a loan, will you/they be able to qualify?