Total Financial Obligation = 10,000 + 5,000 = 15,000

FOIR = (15000/50000) x 100 = 30%

In this case, Mr. Y has a high chance of personal loan approval as his FOIR is 30%.

Factors That Affect FOIR for Personal Loan

If you want to get a personal loan online, the factors that affect FOIR for personal loan approval are listed below.

The major factor that affects your chances of approval for a personal loan is the number of dependents you have. The more earning members of the family you have, the better your chances of approval.

Salary and other sources of income are the major factors. All the income can be combined to decrease the FOIR, which will help with loan approval.

If you have any past dues on the loan, your FOIR will increase, making it difficult for you to get the loan.

If you have any liabilities on top of your regular monthly expenses, that will increase your FOIR.

Your current employment status and how long you have been in the same organization build trust and affect the approval of your personal loan.

Tips to reduce FOIR

Higher FOIR means larger obligations, which reduces your chances of getting a personal loan. Here are a few tips to reduce FOIR to make getting a personal loan easier.

Evaluate Existing Obligation

Before submitting a personal loan application, evaluate your current financial obligations. This includes credit card payments, existing loan EMIs, and other fixed monthly obligations like rent. Understanding your present fixed commitments is key to managing your FOIR.

Extended Loan Tenure

The longer the loan tenure, the lower the EMI. Lower EMI means lower FOIR, which can help you get a personal loan easily, so you are advised to get an extended loan tenure.

Avoid Multiple Loans

Too many loans mean a higher amount paid in EMIs, which will not only increase the FOIR but also cause lenders to lose trust. It is advisable not to take multiple loans at the same time.

Improve Your Credit Score

A higher credit score indicates a better credit history and a lower default risk. If your credit score rises, you might be able to negotiate better loan terms, like a reduced FOIR.

Conclusion

FOIR shows how much of their disposable income can be used to pay off new debt. Monthly expenses shouldn’t exceed 50% of the total income, with an average FOIR of between 40% and 55%.

If you are looking for a personal Loan, LoanTap is the perfect solution. We provide personal loans at affordable interest rates and with minimal documentation.

FAQ

Does the income of a co-borrower impact the FOIR for loan approval?

Ans. Yes, the co-borrower’s income impacts the FOIR calculations. Having an income significantly higher than the obligations can increase the probability of loan approval.

Are FOIR and credit scores the same?

Ans. No, a credit score is not the same as FOIR. While your credit score indicates your trustworthiness based on your credit history, your FOIR calculates the percentage of your current financial obligations compared to your income.

I want to get a loan, but is there a way I can lower my FOIR?

Ans. Before applying for a personal loan, increasing your income or lowering your current fixed obligations can lower your FOIR.

Does FOIR only apply to employed individuals?

Ans. No, FOIR is applicable to both self-employed and salaried employees. To evaluate a borrower’s eligibility for a loan, lenders consider their FOIR.

In the calculation of FOIR, what obligations are considered to be fixed?

Ans. Existing loan EMIs, rent, living expenses, insurance premiums, and any other fixed monthly commitments are examples of fixed obligations