FOIR calculator: methodology

What the calculator answers

"How much of my income already goes to EMIs, what would a new loan do to that, and how much more could I take on before I hit a given limit?"

Inputs

• Monthly take-home (net) income
• Total of the EMIs you already pay each month
• Optionally, the EMI of the new loan you're considering
• The FOIR limit to test, 50% by default and adjustable from 10% to 80%
• Interest rate and tenure of the new loan, used only to turn an EMI into a loan amount

Formulas

FOIR stands for fixed obligation to income ratio.

Current FOIR        = existing EMIs ÷ income × 100
FOIR with new loan  = (existing EMIs + new EMI) ÷ income × 100
EMIs allowed        = limit% × income
Room for a new EMI  = max(0, EMIs allowed − existing EMIs)
Room after new EMI  = EMIs allowed − existing EMIs − new EMI   (negative = over the limit)

The loan amount that the room for a new EMI supports is the present value of that EMI over the tenure, with r the monthly rate (annual rate ÷ 12 ÷ 100) and n the number of months:

Loan = EMI × (1 − (1 + r)^−n) ÷ r        (Loan = EMI × n when r = 0)

We compute in full precision and round only for display.

About the FOIR limit

There is no single FOIR limit. For home, personal and most other loans, each lender sets its own limit in its credit policy, and it can depend on your income, employer, credit history and the type of loan. That's why the limit is an input you choose, and the 50% default is only a starting point. We don't show any bank's limit.

RBI does set a limit for one kind of lending. Under its microfinance directions, a microfinance loan is a collateral-free loan to a household with annual income up to ₹3,00,000, and each lender must cap the household's monthly repayments on all its loans, including the new one, at 50% of monthly household income.

Differences from how a lender calculates FOIR

• Some lenders use gross monthly income; we use take-home pay, which gives a higher, more cautious FOIR.
• Lenders may count other fixed obligations, such as a share of credit card dues, rent, or EMIs you're guaranteeing for someone else. Add these to "existing EMIs" if you want to include them.
• Lenders may assess a different rate or tenure from the one you enter, which changes the loan amount.

Limitations

• An educational estimate, not an eligibility decision. Lenders also look at credit history, employer, age and their own policies.
• The loan amount assumes a fixed rate for the whole tenure and excludes processing fees and other charges.
• FOIR says nothing about rent or living costs. The loan affordability calculator takes those into account.

Privacy

Income figures stay in your browser. They are never put in the URL, stored, logged or sent anywhere.