A Personal Loan is an unsecured credit that several financial institutions in India offer. You do not need any collateral to apply for it. The processing time for this Loan is also usually fast. The funds you get from a Personal Loan can be used for any legitimate financial requirement you have. When you choose a Personal Loan, your eligibility may be affected by multiple factors. One of these is your salary or monthly income.
Let us understand how salary influences Personal Loan eligibility and explore the other factors that affect it. Here are also the methods to calculate Personal Loan eligibility.
Effect of salary on Personal Loan eligibility
Your salary is usually crucial for any Loan. However, it is usually supported by security or collateral in the case of a Secured Loan. This is not the case for a Personal Loan since it does not require collateral. Hence, lenders usually evaluate your monthly income to determine if you can pay the equated monthly instalments of your Loan. Besides, the salary requirements may vary depending on your location.
These days, you can also utilise an online Personal Loan Eligibility Calculator to get an idea about the amount you can borrow depending on your eligibility. This handy tool is helpful and simple. To use it, follow these basic steps:
- Select the type of employment.
- Input your age.
- You also need to enter your net monthly income and net monthly obligations into the calculator.
- Next, enter the Loan tenure and interest rate.
Once you enter this information correctly, the calculator will display the Personal Loan amount you will be eligible for.
Other factors affecting Personal Loan eligibility
Besides monthly income, Personal Loan eligibility could be influenced by:
- Credit scores
Your credit score is a three-digit number that depends on your credit history. If you are wondering if you can get a Personal Loan for a low CIBIL score, you should know that the higher your score, the better your chances of getting approved.
- Age
The financial institution also determines your age to know your Loan repayment capacity.
- Work experience
Besides finding answers to ‘how to improve CIBIL score?’, you should be aware that applicants with more work experience are typically thought to have a more financially secure future.
How to calculate Personal Loan eligibility?
If you want to know the answer to, ‘how much Loan I will get on my salary?’, you may consider the following methods of determining Personal Loan eligibility:
- Multiplier method
The multiplier method is usually considered a simple method of determining how much Personal Loan you can get based on your salary. Typically, the higher your salary and better the company’s reputation, the greater the multiplier. Consequently, you have a higher chance of getting a more significant sum as a Loan and with a lower interest rate.
- Fixed obligation income ratio
This is another method of determining how much money you can get as a Personal Loan. It considers your existing financial obligations and ensures that your total EMI does not exceed a particular percentage of your income. Lenders may consider approximately 50% to 75% of your net income as EMIs.
Conclusion
Your salary and other factors can affect your Personal Loan eligibility. So, before you apply for this Loan, try to understand these requirements in detail.
