A personal loan is an unsecured loan that does not require any collateral. It is taken by individuals from a bank or non-banking financial company to meet their personal needs. Individuals can avail of this loan to fund medical emergencies, vehicle purchases, weddings, children’s higher education, vacation, and so on. It is given on the basis of some key factors, such as income level, credit, employment history, repayment capacity, etc. Your salary is an important factor in deciding the approval of this loan. The reason why your income is given precedence over the other factors is that your income really shows the lender whether you are capable of repaying your loan and paying your EMIs on time.
How much of a personal loan will I be approved for my salary?
You don’t have a standard income to decide your suitability for a loan. The lender will check whether you have defaulted in the past and also verify whether you are servicing any loan in the present besides the one you have applied for. Also, your credit score will play an important role in determining how much personal loan you will be getting. Always remember two things:
- Approach the lending institution directly.
- Keep your credit score above 700.
The amount you will finally be sanctioned depends on the lender’s discretion. But, most banks and NBFCs cap the personal loan amount to Rs. 25 Lakhs. Lenders assess the monthly income of loan applicants and the possible growth in it. In most cases, individuals will be suitable for a monthly loan amount of 30 times the monthly income. Also, to minimize default, individuals will limit their monthly EMIS to about 45 to 60% of their monthly income. For instance, if your monthly income after deductions is Rs. 25,000, your monthly EMI may not exceed 15,000 which is 60% of your monthly income.
Also Read: What is the minimum CIBIL™ score to get a personal loan