How Much Personal Loan Can I Get on My Salary?

There are a number of factors that determine how much loan amount one will be eligible for against their salary structure. A personal loan is among the most preferred credit options that one can obtain in times of financial crisis. Usually, the personal loan amount ranges between ₹500 and ₹50 Lakhs. This type of financing is unsecured; therefore, lenders won't ask you to submit any collateral to secure the loan. This is another reason why the interest rates on these loans are substantially higher than those on secured loans.

 

Notably, your salary is one of the crucial factors that will determine the personal loan amount that you can borrow. Here, we are going to talk about a personal loan on salary and how much you can obtain from this unsecured credit instrument.

When assessing your eligibility for a personal loan, financial institutions will typically use the multiplier technique, the fixed obligation income ratio, or a combination of these two methods. Here is a detailed discussion of each of the methods.

• Multiplier method 

To determine a borrower's eligibility for a personal loan, banks and other financial organisations frequently employ this technique. Under this technique, lenders calculate the eligibility of personal loans based on a predetermined multiple of the income. The approximate range of this multiple is between 10 to 24 times of the applicant’s net monthly salary. The multiplier increases the likelihood of receiving a larger loan at a lower interest rate if you work at a reputed company with a higher salary. 

As an illustration, consider the question, "How much personal loan can I get on a ₹30,000 salary?" You can multiply your monthly earnings by 24 to determine the maximum sum you would be eligible for if you do not have any other EMIs. In this instance, it would be around ₹7.20 Lakhs with a 96-month repayment tenure.

The following table gives an idea about the maximum loan quantum one can be eligible for against a few monthly income figures: 

Expected Eligible Loan Amount for Different Salaries based on Multiplier Method

The examples given above all presume that you do not currently have any monthly responsibilities. Please be aware that these are merely examples provided for your comprehension. In order to know the actual loan amount, you must contact your lending institution and ask for the same.

• Fixed obligation income ratio

The highest amount of instalments you can make using your net income after paying for things like rent and EMIs is the basis for this method's calculation. Lenders often count between 50 and 75 percent of net revenue as instalments. Banks either extend the loan's term or lower the loan amount if your expenses are greater than this proportion.

Let's take a look at a personal loan for someone making ₹30,000. A personal loan of up to ₹5 Lakhs can often be obtained if you have EMI of less than ₹8,000. On the other hand, if your monthly EMI is lower, say ₹4,000, you may be qualified for a personal loan up to ₹7 Lakhs or more, provided your credit score is strong and you want a loan with a 60-month repayment tenure.

Consider a few of the following options: 

Use a personal loan eligibility calculator for precise results. Please be aware, however, that the calculator displays the results based on several variables provided by the user. Your actual loan eligibility is the result of many different things. But if you meet these requirements, using the personal loan eligibility calculator can give you a decent idea of what to expect when you apply. You can also calculate the EMI for the amount you wish to take as a personal loan through an online EMI calculator.

Personal loans are available from loan providers at competitive rates depending on your credit report, repayment history, your monthly income and other variables. In addition to the interest rates and foreclosure fees in the event the loan is prepaid, lenders also levy processing fees. The table below shows the interest rates offered by some of the most reputed financial institutions in India:

*Disclaimer: The mentioned rates are subject to change at the lender’s discretion

To sum it up, individuals opting for a personal loan on salary should keep the above-mentioned pointers in mind. Further, one must ensure to borrow personal loan on salary as much as they actually need and spend the loan amount prudently on time. It is important to keep in mind that failing to repay even a single EMI can hamper your credit score and reduce the chances of loan approvals in the long run.

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