The typical range of an online loan offered by financial institutions is between Rs. 10,000 to Rs. 40 lakhs. However, your ability to repay the loan and your past credit history will ultimately determine your loan amount eligibility.
The simple rule is the higher your salary; the higher will be your loan amount eligibility. But that’s not all. Your loan eligibility calculation also involves some complex parameters like your income-to-debt ratio, your fixed obligations, your past credit behaviour and more.
However, do note that the maximum loan amount offered to you also depends on your choice of lender. You can easily check your loan eligibility by using an online loan calculator available online. You can also download a money loan app to check your maximum loan eligibility.
Read on to know more about your loan eligibility based on your salary.
What is A Personal Loan?
A personal loan is an unsecured loan that you can use to meet diverse financial needs. Borrowers are not required to submit any guarantee or security to avail this loan. These are instant loans meant to serve a multitude of purposes. Be it a personal need or a business need, a personal loan can serve you right.
Today, personal loans are also available as online loan. You can simply visit your preferred lender’s website, fill in the application and submit your documents to avail an instant personal loan. The launch of money loan apps has also made it much easier for you to avail a personal loan.
Personal Loan Eligibility Criteria
The eligibility criteria for a personal loan differ from lender to lender. However, the basic parameters that your lender considers before granting the loan remain the same. Most lenders check your salary, income details, job stability, past credit behaviour and age to estimate the maximum loan amount that you can repay to the lender.
Here are the eligibility criteria set by most lenders that you must qualify to avail a personal loan.
- The candidate must be between the ages of 22 and 58.
- You must have a stable monthly income of Rs. 15,000.
- Salaried and self-employed individuals can apply for this loan.
- Salaried people should have at least one year of experience and six months of current employment.
- Self-employed people should show stable income for at least 2 years.
How much personal loan can I get based on my income?
Lenders consider your income and your expenses to determine the amount of the instant online loan that you are qualified for. Most lenders use the Multiplier method or the Fixed Obligation Income Ratio to determine your maximum loan amount eligibility.
In the multiplier method, the lender determines your loan eligibility based on your monthly income. This is best suited when you are applying for credit for the first time or you don’t have any ongoing debts. The lender multiplies your monthly income by 27 and sanctions a loan for a period of 60 months.
Thus, the higher your salary, the higher will be your loan amount. However, most lenders have an upper limit. Money loan apps offer a loan of up to Rs. 1.5 lakh while banks and NBFCs may offer an instant loan of up to Rs. 30 lakhs. The amount also depends on the reputation of your employer.
Fixed Obligation Income Ratio
In the Fixed Obligation Income Ratio method, the amount of loan you are eligible for depends on your income and your financial obligations. The lender assesses your bank statements to understand your monthly expenses. These include your rent, credit card bills, utility bills, existing loan EMIs, investments etc.
Generally, lenders offer you a personal loan of a certain amount whose EMI does not exceed 50 % of your net income. So, if you have existing EMIs, then the cumulative EMI should be below 50 %. Simply, the higher your existing debts and obligations the lower will be your loan amount eligibility.
Let’s understand these methods with an example:
Suppose you have a monthly salary of Rs. 20, 000.
According to the Multiplier method, you will be eligible for a loan of Rs. 5.40 lakhs for 5 years. Your monthly income of Rs. 20,000 is multiplied by 27 to arrive at this number. This is considering you have no existing debts or obligations.
The Fixed Obligation Income Ratio method is used when you have to repay your existing credit. If you have total monthly EMIs of Rs. 3000, then your net salary is considered as Rs. 17,000. This number is then multiplied by 27 and your eligibility is pegged at Rs. 4.08 lakhs.
An instant online loan on your salary can help you meet any kind of financial obligation. But you must know your maximum loan amount eligibility before you plan to avail a loan. You can use an online loan calculator available on online websites or money loan apps. Knowing your loan amount eligibility will help you manage your finances in a better way.