loans
March 18, 20265 min read
Debt-to-Income Ratio and How Banks Decide Your Loan Limit
By Surya Prakash
Financial Analyst & Editor
What is FOIR?
Fixed Obligation to Income Ratio (FOIR) is a key metric used by banks to evaluate your loan eligibility. It measures your monthly debt liabilities (EMIs, credit card bills, etc.) against your net monthly salary.
The Eligibility Threshold
Generally, banks prefer your FOIR to stay below 40% to 50%. This ensures you have sufficient disposable income left for monthly living expenses, reducing the risk of loan default.
How to Improve Your Loan Eligibility
You can increase your loan eligibility by closing existing high-interest debts, adding a co-applicant (spouse/parents) with a stable income, or opting for a longer loan tenure to lower the monthly EMI.
#loan eligibility#foir#debt to income#home loan#credit score