How Much Personal Loan Can I Get Based My Salary

A personal loan is among the most preferred credit options that one can obtain in times of financial crisis. Personal loans offer a quick and reliable solution for medical emergencies, home renovations, or any other unforeseen expenses. Typically, personal loan amounts range between Rs. 500 and Rs. 50 Lakhs. These loans are unsecured, meaning you need not submit any collateral. However, due to the absence of collateral, the interest rates on these loans are higher than those on secured loans.

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Factors Determining Personal Loan Eligibility

Your salary is one of the crucial factors that will determine the personal loan amount you can borrow. Here, we will discuss how a personal loan on salary works and how much you can obtain from this unsecured credit instrument. Lenders, such as banks and non-banking financial companies (NBFCs), evaluate various factors to determine your eligibility for a personal loan.

The primary factors include age, monthly income, city of residence, and other eligibility criteria. The normal range of personal loans offered by banks and NBFCs is between Rs. 500 and Rs. 50 Lakhs. However, several key elements will influence how much of a personal loan you qualify for:

• Monthly Salary: Your net monthly income is a significant determinant.
• Current Loan Repayments: Any existing loan obligations you have.
• Co-applicants Income: If applicable, this can enhance your loan eligibility.
• Repayment Capacity: Banks and NBFCs assess your repayment capacity based on the above factors.

Methods to Calculate Personal Loan Amounts

When assessing your eligibility for a personal loan, financial institutions typically use the multiplier method, the fixed obligation income ratio, or a mixture of these methods.

Multiplier Method

Banks and other financial organisations frequently use this technique to determine a borrower's eligibility for a personal loan. Under this method, lenders calculate the eligibility of a personal loan based on a predetermined multiple of the income. The approximate range of this multiple is between 10 to 28 times the applicant's net monthly salary.

Example: "How much personal loan can I get on a Rs. 30,000 salary?" You may multiply your monthly income by 27 to calculate the maximum sum you are eligible for if you don't have any other EMIs. In this instance, it would be around Rs. 8 Lakhs with a 60-month repayment tenure.

Fixed Obligation Income Ratio (FOIR)

The basis for this method's calculation is the highest amount of instalments you can make using your net income after paying for essential expenses like rent and existing EMIs. Lenders often consider between 50 and 75 per cent of your net income for instalments. If your expenses exceed this proportion, banks either lower the loan amount or extend the loan term.

Example: On a salary of Rs. 30,000, using the FOIR method:

• If you have monthly EMIs of Rs. 3,000, you will be eligible for Rs. 7.70 Lakhs.
• With EMIs of Rs. 5,000, you will get an amount of Rs. 6.0 Lakhs.
• With EMIs of Rs. 8,000, you will get an amount of Rs. 5.50 Lakhs.
• With EMIs of Rs. 10,000, you will be eligible for a loan of Rs. 4.80 Lakhs.

Also Read: Personal Loan of Rs. 5 lakhs Online Instantly

Using Personal Loan Calculators

For precise results, use a personal loan eligibility calculator. This tool displays results based on several variables the user provides, giving you a good idea of what to expect when you apply. However, your actual loan eligibility will be influenced by multiple factors. The calculator can help you plan and understand your potential loan amount and repayment schedule.

Understanding the EMI/NMI Ratio

The EMI/NMI ratio is the proportion of your net monthly income (NMI) spent on servicing your existing EMIs as well as the EMI of the new loan. Typically, lenders sanction personal loans to applicants with up to 50-55% EMI/NMI ratio. Your net monthly income, loan tenure, and interest rate determine your EMI/NMI ratio. While you cannot change your fixed monthly EMI obligations or net monthly income, you may either avail of a personal loan or extend your loan tenure at a lower interest rate to increase your chances for a higher amount.

How Much Loan Can I Get on 30000 Salary?

Let's look closely at the options available for someone earning Rs. 30,000 monthly.

Multiplier Method

If you have no other EMIs, this method allows you to get up to Rs. 8.10 Lakhs for a 5-year term.

Fixed Obligation Income Ratio

If you have monthly EMIs of Rs. 3,000, you will be eligible for Rs. 7.70 Lakhs.

• With EMIs of Rs. 5,000, you will get Rs. 6.0 Lakhs.
• With EMIs of Rs. 8,000, you will get Rs. 5.50 Lakhs.
• With EMIs of Rs. 10,000, you will get Rs. 4.80 Lakhs.

Factors Affecting Loan Eligibility

• Credit Score: A high credit score increases your chances of getting a higher loan amount at better interest rates.
• Employment Stability: Lenders prefer applicants with stable jobs and a regular income.
• Age: Younger applicants with more working years ahead are often eligible for higher loan amounts.
• Employer Category: Working for a reputed company can enhance your eligibility.

Conclusion

Banks and NBFCs usually offer personal loans ranging from Rs. 10,000 to Rs. 50 Lakhs. However, the personal loan amount you are eligible for primarily depends on your repayment capacity. Evaluating your monthly disposable income and loan repayment obligations is crucial in determining your eligibility. Exploring the maximum personal loan amount based on your salary structure can help you make informed decisions and manage your financial needs effectively when needing financial assistance.