High FOIR: The silent reason your loan amount gets reduced

You earn well. Your credit score is healthy. Yet your loan amount gets reduced. Why?

One common but overlooked reason is high FOIR.

FOIR, or Fixed Obligation to Income Ratio, is one of the most important metrics lenders use to decide how much you can borrow. If your FOIR crosses acceptable limits, lenders may reduce your eligible loan amount or even reject the application.

At Saarathi.ai, we have observed that many borrowers focus only on income and credit score, ignoring FOIR. Understanding this single number can significantly improve your loan approval outcome.

Let us simplify it.

What Is FOIR?

FOIR stands for Fixed Obligation to Income Ratio.

It measures how much of your monthly income is already committed to fixed payments.

FOIR Formula:

FOIR = Total Monthly Fixed Obligations ÷ Net Monthly Income × 100

Fixed obligations include:

• Existing EMIs

• Credit card minimum dues

• Personal loan repayments

• Car loan EMIs

• Any other recurring loan commitments

If your FOIR is high, lenders see you as financially stretched.

Why Lenders Care So Much About FOIR

Lenders want assurance that you can comfortably repay the new loan.

Under risk assessment norms guided by the Reserve Bank of India, banks and NBFCs evaluate repayment capacity carefully.

FOIR helps them answer one key question:

Can this borrower handle one more EMI without stress?

If the answer is uncertain, they reduce the loan amount.

Ideal FOIR Range for Loan Approval

Different lenders follow different thresholds, but broadly:

• Up to 40 percent: Comfortable range

• 40 to 50 percent: Moderate risk

• Above 50 percent: High risk

For higher ticket loans like home loans, lenders may stretch FOIR slightly if income is stable.

You can check your FOIR instantly using Saarathi AI before applying.

How High FOIR Reduces Your Loan Amount

Let us understand with an example.

Example Scenario

Net monthly income: Rs 1,00,000
Existing EMIs: Rs 45,000

FOIR = 45,000 ÷ 1,00,000 = 45 percent

If lender policy caps FOIR at 50 percent, your maximum additional EMI allowed is:

50 percent of 1,00,000 = Rs 50,000

Available EMI capacity = 50,000 - 45,000 = Rs 5,000

This severely limits your new loan eligibility.

Even if your income is strong, high obligations reduce borrowing capacity.

Common Reasons FOIR Becomes High

Many borrowers do not realize how quickly FOIR rises.

1. Multiple Small Loans

• Buy Now Pay Later

• Consumer durable loans

• Short-term personal loans

Individually small, but together they increase FOIR.

2. High Credit Card Usage

Even if you pay in full, lenders may consider minimum dues as obligation.

3. Car Loans Before Home Loans

Taking a car loan before applying for a home loan can reduce home loan eligibility significantly.

At Saarathi.ai, we have observed that timing major loans strategically improves approval outcomes.

4. Overleveraging During Income Growth

When income increases, borrowers sometimes take additional loans. But lenders still assess total fixed commitments.

FOIR vs Credit Score: Which Matters More?

Both matter, but they measure different things.

• Credit score shows repayment history

• FOIR shows current repayment burden

You may have a 780+ credit score, but if FOIR is 60 percent, your loan amount may still be reduced.

Insights from CRISIL indicate that lenders increasingly combine credit bureau data with income-to-obligation ratios for better risk assessment.

FOIR Limits by Loan Type

These limits vary by lender and income profile.

You can compare lender-specific policies directly on Saarathi.ai before applying.

How to Reduce Your FOIR Before Applying

If you are planning a loan in the next few months, here is what you can do:

1. Prepay Small Loans

Closing small EMIs improves FOIR instantly.

2. Consolidate Debt

A single lower EMI through balance transfer may improve eligibility.

3. Avoid New EMIs

Do not take new consumer loans before applying for a major loan.

4. Increase Declared Income

For self-employed borrowers, consistent ITR filing improves assessed income.

5. Add a Co-Applicant

Adding a spouse or earning family member increases combined income, reducing FOIR impact.

You can evaluate combined eligibility using Saarathi AI before submitting documents.

When High FOIR Does Not Mean Rejection

High FOIR does not always lead to rejection.

Lenders may still approve if:

• Income is very high

• Employer category is strong

• Collateral is available

• Credit history is excellent

However, loan amount may still be adjusted.

Through Saarathi Bazaar, you can track loan offers and understand eligibility changes transparently.

Real-World Insight

Example:

Applicant earning Rs 1.2 lakh monthly
Existing EMIs Rs 60,000
FOIR 50 percent

Requested home loan for Rs 80 lakh

Lender reduced sanction to Rs 62 lakh to maintain acceptable FOIR.

This situation is more common than most borrowers realize.

Should You Delay Your Loan If FOIR Is High?

Consider delaying if:

• You can close one major EMI soon

• A bonus or income hike is expected

• A car loan will end in next few months

Even a small reduction in obligations can significantly increase loan eligibility.

FAQs

1. What is a safe FOIR for loan approval?

Ideally below 40-45 percent for smooth approval.

2. Does FOIR affect credit score?

No. It affects loan eligibility, not credit score.

3. Can high FOIR lead to loan rejection?

Yes, especially if it crosses lender thresholds.

4. Is FOIR calculated on gross or net income?

Usually net monthly income.

5. Can adding co-applicant reduce FOIR?

Yes, because total income increases.

Conclusion

High FOIR is often the silent reason your loan amount gets reduced.

Here are the key takeaways:

• FOIR measures your repayment burden

• Above 50 percent is considered risky

• Existing EMIs reduce new loan eligibility

• Prepayment and consolidation improve FOIR

• Strategic timing increases approval chances

Before applying, calculate your FOIR and discover personalized loan options on Saarathi.ai today. Check eligibility instantly, compare lenders, and apply with clarity and confidence.