One of the easier loans to avail, a personal loan makes sure you have the funds when you need it. This financing option is unsecured in nature, meaning most lenders wouldn’t require you to pledge any asset as security for the loan. This is also the reason why such loans carry a comparatively higher rate of interest compared to secured loans.
There are other reasons behind considering your monthly income a vital standard prior to extending you a personal loan, them being:
- Higher your income, more will be your scope of borrowing
- You will then be flexible with the chosen loan tenor as well
- Competitive interest rates
Another factor that lending institutions often look into before signing the dotted line in the loan approval document is whether you have availed loans from other lenders or banks as well.
How much personal loan will I be approved on my salary?
Again, there isn’t really a standard income parameter to judge your suitability for a loan. The lender is likely to first check whether you have defaulted in the past and also if you are currently servicing any loan, besides the one you are applying for.
There are a few things you should keep in mind:
- Approach the lending institution directly
- Keep your credit score above 700
How much you are eligible to borrow is at the lender’s discretion. However, most banks and NBFCs limit a personal loan at Rs.25 lakhs to an individual. Individuals are generally eligible for a loan amount up to 60 times their monthly income. So, if your income is Rs.20,000 a month, you are eligible for a loan up to Rs.12 lakh.
Additionally, in order to minimize risk of default, lenders keep the EMIs of the loan to about 45-60% of your monthly income. For instance, if your monthly income, inclusive of all deductions, is within Rs.20,000 – Rs.25,000, chances are the loan EMI amount wouldn’t exceed Rs.12,500, which is about 50% of your monthly income.
While these are general guiding principles for lenders, ensure that you have a good credit score and credit history. Any instance of previous default will hamper your chances of getting the desired loan amount, or a favorable tenor and interest rate.
You can also share a few basic details about yourself and check out all the pre-approved offers on personal, home and business loans from Bajaj Finserv.
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