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2 mins Read | 6 Months Ago

What is FOIR and how does it affect your Personal Loan approval

What is Foir Does It Affect Your Personal Loan Approval

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Many factors can influence an individual’s finances during the loan approval process. Among these factors, the Fixed Obligation-to-Income Ratio (FOIR) plays a crucial role, especially when applying for a Personal Loan. Understanding how FOIR for Personal Loan operates is a financial literacy exercise and a strategic move towards enhancing your chances of obtaining a Personal Loan approval.

Let us learn more about the FOIR, its significance in the loan approval process and practical tips to manage and optimise this ratio efficiently.

What is FOIR?

FOIR or Fixed Obligation to Income Ratio stands as an important factor in the loan approval process, particularly when seeking a Personal Loan from banks or financial institutions. This numerical representation serves as a compass for banks or financial institutions, guiding them through an applicant's debt report. FOIR for Personal Loan revolves around Equated Monthly Instalments (EMIs), calculated as a Debt-to-Income (DTI) ratio, providing an analysis of an individual's financial commitments relative to their income. Essentially, it demonstrates the balance between existing debts and disposable income.

For ICICI Bank Personal Loans, understanding FOIR is crucial for individuals, as it offers a transparent measure of an applicant's financial health.

How does FOIR impact Personal Loan approval?

Understanding how FOIR affects Personal Loan approval is crucial for prospective borrowers. Typically, a credible borrower's average FOIR in loan falls within the range of 40% to 55%, with variations for high net worth individuals. This FOIR range is a benchmark, allowing applicants to understand their FOIR in loan against established norms and facilitating a more informed and strategic approach when navigating the ICICI Bank Personal Loan application process. The impact of FOIR on loan approval can be summarised as follows:

  • Lower FOIR increases approval chances:

A lower FOIR indicates that the applicant has a relatively smaller financial obligation compared to their monthly income. This implies a substantial disposable income, enhancing the borrower's capacity to repay the loan EMI. In such cases, the likelihood of loan approval is higher. In the context of ICICI Bank Personal Loans, this shows the importance of maintaining a reduced FOIR, as it directly correlates with higher chances of securing the desired loan amount.

  • Higher FOIR reduces creditworthiness:

On the other side, a higher FOIR suggests that the applicant is burdened with significant debt, potentially limiting their disposable income. This reduces the creditworthiness of the borrower, making loan approval less likely. It emphasises the applicants' need to manage and optimise their financial obligations to maintain a competitive FOIR. By doing so, individuals enhance their chances of securing loan approval and boost their overall creditworthiness.

How is FOIR calculated?

The calculation of FOIR is straightforward and involves assessing the relationship between monthly debts and gross total monthly income. The formula is as follows:

FOIR = (sum of total debt / total monthly income) × 100

It is important to note that FOIR calculations exclude tax deductions and contributions to Fixed Deposits (FDs) and Recurring Deposits (RDs). By understanding this formula, individuals can gain valuable insights into their debt, aiding in informed decision-making when considering ICICI Bank Personal Loans. This transparency in FOIR calculation aligns with a meticulous assessment criteria, offering applicants a clear roadmap to gauge and optimise their financial health for successful loan approval.

Strategies to reduce FOIR

Managing and reducing FOIR can enhance your chances of getting approved for a Personal Loan. Here are six effective pointers to optimise your FOIR and enhance your loan approval chances:

  • Apply for a joint loan:

  • You should opt for joint loan applications to share the EMI burden between two applicants. This can significantly reduce individual FOIR and increase the likelihood of loan approval.

  • Maintain a healthy credit history:

  • A strong credit history is vital for loan approval. You can improve your low CIBIL Personal Loan by ensuring timely payments and maintaining a lower credit utilisation ratio. A positive credit history positively influences your low CIBIL Personal Loan and creditworthiness, making you a more attractive candidate for ICICI Bank Personal Loans.

  • Avoid multiple loans:

  • Having multiple outstanding loans may convey the impression of financial strain. You can avoid acquiring multiple loans simultaneously to maintain financial stability. Many banks or financial institutions, including ICICI Bank, may interpret multiple outstanding loans as a strain on your finances, potentially impacting your loan approval chances.

  • Refinance existing debts:

  • You can consider refinancing existing debts to potentially reduce the monthly financial burden. This strategic move can lead to a more favourable FOIR, showcasing your improved financial capacity to ICICI Bank.

  • Negotiate lower interest rates:

  • You can negotiate with banks or financial institutions including ICICI Bank, to secure lower interest rates on existing debts. A reduced interest rate can lessen the debt burden, positively influencing your FOIR and loan approval chances.

  • Enhance income streams:

  • You can explore various options to enhance your income, providing a safety net against higher financial obligations. A diversified income portfolio contributes to a healthier FOIR, indicating that you have the financial means to meet loan obligations.


Understanding and managing FOIR is important when seeking a Personal Loan, especially with ICICI Bank. A lower FOIR signifies financial stability, increasing the likelihood of loan approval. Conversely, a higher FOIR may raise concerns about repayment capacity, potentially leading to non-approval.

Prospective borrowers should proactively assess their FOIR, adopt strategies to reduce it and align with ICICI Bank's specific criteria for a smoother loan approval process. By navigating the intricacies of FOIR, applicants can secure the funds they need and contribute to a healthier financial profile.

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