What FOIR Is and How Banks Decide How Much Loan You Can Get
FOIR explained with a Rs. 1 lakh income worked example, a table showing how tenure, rate and existing EMIs change your eligible loan, and what the calculator leaves out.
What FOIR means
FOIR stands for Fixed Obligation to Income Ratio. It is the share of your monthly income that goes to fixed debt payments: home loan EMIs, car loan EMIs, personal loan EMIs, and often credit card minimum dues. When you apply for a loan, many Indian lenders work out how large a new EMI you can carry before your total obligations cross a ceiling. That ceiling is the FOIR limit.
The formula is simple: FOIR = (existing EMIs + proposed EMI) / monthly income. If a lender allows 50% and you earn Rs. 1,00,000 a month, your total EMIs, old and new together, should stay at or below Rs. 50,000.
This post is general information to help you understand how affordability is judged. It is not financial advice, and every lender sets its own policy.
How our loan eligibility calculator works
The loan eligibility calculator asks for four things: monthly income, existing EMIs, interest rate and tenure in years. It then does three steps:
- Takes 50% of monthly income. The 50% is fixed in the tool; you cannot change it.
- Subtracts your existing EMIs to get the maximum new EMI.
- Runs the standard EMI formula in reverse to find the loan principal that such an EMI would repay over your chosen tenure at your chosen rate.
The reverse step is the same maths behind the EMI calculator, just solved for the principal instead of the instalment.
A worked example
Suppose your monthly income is Rs. 1,00,000, you already pay Rs. 10,000 in EMIs, and you want a 20-year loan at 9% a year. The 9% is an illustrative figure, not a current market rate. The numbers below come from a script that mirrors the tool's formula.
- 50% of income: Rs. 50,000
- Less existing EMIs: Rs. 10,000
- Maximum new EMI: Rs. 40,000
- Loan that a Rs. 40,000 EMI repays over 240 months at 9%: about Rs. 44,45,798
To check the result, put Rs. 44,45,798 at 9% for 20 years into the EMI calculator and you get an EMI of about Rs. 40,029, matching the Rs. 40,000 rounded loan size. Over 20 years you would pay roughly Rs. 96,00,000 in total, of which about Rs. 51,54,202 is interest. A large loan means a large interest bill, which is why eligibility and affordability are not the same thing.
What changes the answer
Keeping income at Rs. 1,00,000 and existing EMIs at Rs. 10,000, here is how the maximum loan moves when you change one input at a time (all computed with the same formula):
| Change | Max new EMI | Max loan |
|---|---|---|
| Base: 9%, 20 years, 50% FOIR | Rs. 40,000 | Rs. 44,45,798 |
| Tenure 15 years | Rs. 40,000 | Rs. 39,43,736 |
| Tenure 25 years | Rs. 40,000 | Rs. 47,66,465 |
| Rate 10% instead of 9% | Rs. 40,000 | Rs. 41,44,985 |
| Existing EMIs Rs. 40,000 instead of Rs. 10,000 | Rs. 10,000 | Rs. 11,11,450 |
| Existing EMIs Rs. 50,000 | Rs. 0 | Rs. 0 |
Three lessons follow. First, existing EMIs matter more than almost anything else, because every rupee of old EMI removes a rupee of capacity one for one. Clearing a small personal loan before applying can raise your limit by far more than its size suggests. Second, a longer tenure raises eligibility but only modestly: going from 20 to 25 years added about Rs. 3.2 lakh here, while the extra interest you pay is large. Third, a one-point rise in rate cut the eligible loan by about Rs. 3 lakh.
Using your own FOIR, not the lender's
The tool's 50% is a ceiling, not a target. Lenders vary: the figure is often lower for lower incomes and higher for higher incomes, and the tool's own note says banks typically allow somewhere in the 40% to 55% range. That range is a rough guide, so ask your lender for its actual policy.
You can adjust the tool's output by hand. If you want to plan with a 40% limit, the maximum new EMI in the example above becomes Rs. 40,000 minus Rs. 10,000 = Rs. 30,000, which supports a loan of about Rs. 33,34,349. At 55%, the maximum EMI is Rs. 45,000 and the loan about Rs. 50,01,523. The tool will not show these directly, but the gap between them shows how sensitive eligibility is to one policy number.
A safer personal rule is to decide what EMI you could pay comfortably if your income dipped or your expenses rose, and work back from that. A lender approving you for Rs. 40,000 of EMI does not mean your household budget can absorb it. If you do take a loan near the limit, the loan prepayment calculator shows how a part-prepayment changes your EMI afterwards.
A simple decision framework
- List every fixed obligation: all EMIs, plus anything you pay on a regular schedule that a lender would count.
- Run the tool with your income, rate and the longest tenure you would realistically accept.
- Cut the result by asking what your budget can carry. If your monthly expenses are high, pick a lower comfortable EMI and use the EMI calculator to find the loan that matches.
- Compare tenures. A shorter tenure lowers total interest but needs a higher EMI; check that it fits.
- Confirm with the lender before house hunting, since the sanctioned amount decides your budget.
Limits: what this tool does not cover
- Fixed 50%. You cannot change the FOIR in the tool, and your lender may use a different one.
- Credit score. Lenders check your credit history, and a weak score can reduce the amount or raise the rate. The tool ignores it.
- Loan-to-value limits. For a home loan the lender also limits the loan to a share of the property's value. That cap is not modelled.
- Income definition. Lenders may count only part of variable pay, bonuses or rental income, and may use net rather than gross income. The tool uses whatever number you type.
- Other costs. Processing fees, insurance and rate resets on floating loans are not included.
- Negative results. If existing EMIs are at or above half your income, the method gives no room, and the tool will show zero or a negative number.
Treat the result as a first estimate to guide your search, not a guarantee of approval.