Financial institutions offer personal loans to assist you in mitigating your personal financial goals, like organizing a dream, planning an exotic trip abroad, and clearing all medical exigency expenses. A common question in the mind of many borrowers is – how much personal you can get. While there’s no standard formula to evaluate your personal loan eligibility, lenders consider different factors in deciding the loan amount that you can take up as a personal loan. Here in this section, you will find all the required info about personal loans and loan proceeds that banks may approve depending on your income.
What’s a personal loan?
A personal loan is an unsecured loan and one of the simplest loans to avail. They ensure you get the required funds when you require them. A few of the popular personal loan uses involve health expenditures, education, wedding, vacation, etc. As this financing option is unsecured in nature, lenders do not require you to pledge any asset in the form of collateral or security for a personal loan. The interest rate for this unsecured personal loan is way higher than secured loans.
Applying for a personal loan is simple. However, it may be challenging to get your personal loan approved and disbursed. The answer to how much personal loan you can get is based on a mix of parameters. The most crucial ones are your credit score and monthly salary. Your income is given higher priority as it allows lenders to understand your potential to repay the loan EMI on time, thus ruling out the default risk. Note that in the case of any personal loan issue, you can approach the lender from whom you are availing the loan. For instance, if you are looking to avail a personal loan from Bajaj and have specific queries, then you can approach Bajaj personal loan customer care number to get an answer to all your queries. In case you have any query linked with your personal loan EMI, you can use the Bajaj personal loan EMI calculator to compute EMI and overall interest constituent.
How much personal loan can you get?
Before placing an application for a personal loan, every one of you is generally worried regarding the amount that the lender sanction, particularly if your basic income source is salary. You may often think, ‘what’s the minimum salary criteria for getting a personal loan approval’. Besides this question of what’s the maximum or minimum personal loan that you can take up, it is necessary to understand all the necessary eligibility parameters. It varies for the salaried and self-employed individuals. For a personal loan, the major eligibility parameter are as follows –
∙ Applicant’s age must be from 22 to 58 years.
∙ Applicant’s income must be minimal of Rs 20,000.
∙ Applicant must be employed with the private or public sector.
∙ Self-employed individuals must be in the business for at least 5 years.
∙ Salaried individuals must have at least 1 year of experience and work in the current company for 6 months. Banks use 2 major methods to compute the personal loan that you are eligible for. These methods are known as the Fixed Obligation Income Ratio and Multiplier Method.
A low-salary personal loan is tough to get if you do not mitigate the said eligibility parameter. For instance, if you hold a monthly salary of Rs 180,000, this means you have below minimum eligibility criteria.
Multiplier method –
Here in this method, the lender inquires regarding the monthly income. Post this, and it multiplies the amount by figure 27 and sanctions the loan for a time period of 5 years. If you have a higher income and the reputation of the company that you are employed with is good, then you hold a good chance of getting higher loan proceeds at a lower rate of interest. Here, lenders can use a higher multiplier calculation. In this, your financial obligation is reduced from your income before multiplying all of it by 27.
Fixed obligation income ratio
Here in this method, the loan proceeds you are eligible for are dependent upon your financial obligations. Lenders evaluate your bank statements to better understand your monthly expenditures before deciding on the loan proceeds to sanction. Such monthly expenses involve EMIs, rent, etc. Usually, lenders consider around 50 per cent to 75 per cent of your net income as installments. If you hold more than this specific percentage of expenditures, the lender will either enhance your loan repayment tenure or reduce your sanctioned proceeds.
What are the parameters impacting personal loan eligibility?
There’s zero collateral or security requirement in the case of a personal loan. Consequently, banks can depend just on the credibility of the borrower to decide the borrower’s personal loan eligibility. Major parameters that play an important role in evaluating your credibility are –
Monthly income –
One of the important parameters that lenders factor in before approving your personal loan application includes your monthly income. As you are aware of from before, obtaining a personal loan for a salary below 20,000 is a little tough, and it would be in your complete favour if you hold a higher income. However, this is not the sole parameter, and an income over 20,000 does not assure a personal loan. Also, lenders assess your DTI (debt to income) ratio and the proceeds you need to mitigate your financial obligations. To enhance your chances of availing of loan approval, you can simply combine your spouse’s income and place an application as a co-applicant. Thus, it will assist you in getting a low-salary personal loan.
Credit score –
CIR (Credit Information Company), like CIBIL, offers a 3-digit credit score to all. This score is anywhere from 300 to 900. Your score assists lenders in understanding your creditworthiness. The credit score computation is based on your previous loan repayments, your credit card payments, your bill payments, and others. If you have been repaying all your dues on time, you may enjoy a good credit score, which enhances your chances of availing of personal loan approval. Having a credit score of 750 and above is looked upon as good.