FOIR vs LTV: Understanding the Key Ratios That Decide Your Loan Approval

When applying for a loan, many borrowers focus only on income and interest rates. However, banks rely heavily on two important financial ratios: FOIR (Fixed Obligation to Income Ratio) and LTV (Loan to Value Ratio). These ratios help lenders assess how much you can borrow and how safely they can lend to you.

Understanding FOIR vs LTV gives you clarity on why loan amounts are approved, reduced, or sometimes rejected.

What Is FOIR?

FOIR (Fixed Obligation to Income Ratio) measures how much of your monthly income is already committed to fixed obligations like:

• Existing loan EMIs
• Credit card dues
• Proposed new loan EMI

FOIR Formula:

FOIR = (Total Monthly Obligations ÷ Monthly Income) × 100

Ideal FOIR Range:

• Up to 40%: Excellent
• 40–50%: Acceptable
• Above 50%: Risky

FOIR tells the bank whether you can comfortably afford the EMI.

What Is LTV?

LTV (Loan to Value Ratio) measures how much of the asset value the bank is willing to finance.

LTV Formula:

LTV = (Loan Amount ÷ Property/Asset Value) × 100

Typical LTV Limits:

• Home loans: 75%–90% (as per RBI norms)
• Loan against property: 50%–70%
• Vehicle loans: 80%–90%

LTV shows the risk associated with the asset.

FOIR vs LTV: Key Differences

How FOIR and LTV Work Together

Banks don’t rely on only one ratio. Both work simultaneously:

• Good LTV but high FOIR: Loan amount may be reduced
• Low FOIR but high LTV: Higher down payment required
• Balanced FOIR + Healthy LTV: Best loan terms and fast approval

For example, even if you buy a property with a low LTV (high down payment), a high FOIR can still lead to rejection.

Which Is More Important: FOIR or LTV?

There’s no single answer — it depends on the loan type:

• Personal loans: FOIR is more important
• Home loans / LAP: Both FOIR and LTV are equally important
• High-value loans: Banks are stricter on both ratios

Ultimately, credit score, FOIR, and LTV together decide final approval.

How You Can Improve Both Ratios

Improve FOIR

• Close small loans
• Reduce credit card usage
• Extend loan tenure
• Add a co-applicant

Improve LTV

• Increase down payment
• Buy property at fair market value
• Choose lenders with flexible LTV norms

How Direct Credit Helps You

At Direct Credit, we evaluate your FOIR, LTV, and credit score together to structure the best possible loan solution. Instead of random applications, we match you with lenders that suit your profile — saving time, money, and unnecessary rejections.

Contact Us

Confused about whether FOIR or LTV is affecting your loan approval? The experts at Direct Credit will analyze your income, obligations, and property value to find the right loan structure for you. Call us today at 9010031003 for personalized advice, better loan terms, and faster approvals.