Pre-Approved Personal Loan- How to get it?

Your salary is vital for the bank to determine the Personal Loan amount you're eligible for. Read his blog to know how this calculation is done.

A Personal Loan is a smart way to fulfil any financial obligation, whether a medical emergency or any other unexpected expense. For salaried applicants, their monthly income is a vital consideration for the loan providers. It is based on your salary and some other aspects that lenders calculate the loan amount you're eligible for.

So, how much Personal Loan on salary can you get? How is this calculation done? Let’s take a look:

Lenders use two methods for calculating Personal Loan eligibility. They are the Multiplier Method and Fixed Income Obligation Ratio.

• Multiplier Method

With the multiplier method, the maximum loan amount a salaried applicant is eligible for is determined by multiplying their monthly salary by a multiple. Depending on the lender you choose and how well you fulfil other eligibility criteria for the loan, this multiple will be 4.

To give you an idea, an applicant employed at a reputed company with a monthly income of INR 50,000 and an excellent credit history can be eligible for a Personal Loan of up to INR 2 Lacs (multiplier of 4) if there are no other fixed monthly obligations. You can also use an online Personal Loan EMI calculator to understand loan eligibility better.

• Fixed Income Obligation

People generally have various fixed obligations like loan EMIs and rent. Lenders also consider those when calculating loan eligibility, as they significantly reduce your disposable income after such obligations are taken care of. So, if you're currently repaying a loan and living on rent, the lender will approve your eligibility based on 25%-50% of your monthly income.

Let's consider the monthly salary as INR 50,000 and an existing loan EMI of INR 15,000. The loan amount will be calculated on the remaining amount of INR 35,000 to ensure you can comfortably manage the EMI of the new Personal Loan. In this case, the maximum loan amount can be INR 1.4 Lakhs (multiplier of 4).

So, how much personal loan can I get on my salary? Let’s take a look at some examples:

Disclaimer: For representation purposes only. Actual figures may vary and depend on factors like monthly obligations, credit score, etc.

Based on the multiplier method, you can get a maximum Personal Loan of INR 80,000 on a monthly salary of INR 20,000 with no fixed obligations. However, if you have monthly obligations of INR 5,000-INR 10,000, the maximum loan amount will be INR 20,000 - INR 40,000. Monthly obligations of above INR 10,000 will mostly make you ineligible for a Personal Loan.

With no fixed monthly obligations, you can get a Personal Loan of up to INR 1 Lac on a salary of INR 25,000. However, if monthly obligations are up to INR 10,000, you can get a Personal loan of up to INR 40,000. Higher fixed obligations will make you ineligible for a Personal Loan.

With a monthly salary of INR 30,000, you can get a personal loan of up to INR 1.2 Lac. A fixed obligation of INR 10,000 will reduce the eligibility to INR 40,000 and up to INR 60,000 if the obligations are up to INR 15,000.

If your monthly income is INR 40,000, you can be eligible for a personal loan of up to INR 1.6 Lac. Monthly obligations of up to INR 20,000-25,000 will reduce the loan amount to INR 80,000 to 1 Lac.

If there are zero monthly obligations, you can get a Personal Loan of up to INR 2 Lac on a monthly salary of INR 50,000. You can take a Personal Loan of up to INR 1.2 Lac if the monthly obligations are up to INR 30,000. 

You can use a Personal Loan Calculator to find out the approximate loan amount you are eligible for. As for improving your eligibility, you can-

• Try to improve your Credit Score to 750 and above
• Repay existing loans
• Look for ways to increase your monthly income
• Consider a lender with whom you have a long-standing relationship

When comparing Personal Loans, check the lender's eligibility requirements to ensure you're comfortably eligible for the required loan amount. If you find yourself ineligible for the loan, wait for a few months and work towards improving your eligibility. Remember, your eligibility also impacts the Personal Loan interest rates.

AU Small Finance Bank offers Personal Loans at highly competitive interest rates for tenures ranging from 12 to 60 months. With easy online and offline applications and minimal documentation, the leading Small Finance Bank makes the entire process convenient and quick. Learn more about Personal Loan and initiate the application process today.