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How Much Personal Loan Can I Get Based on My Salary?
Posted on Tuesday, August 27th, 2024 | By IndusInd Bank
A personal loan can be an ideal solution for various financial needs, whether it is for home renovation, medical expenses, or a dream vacation. However, before you apply, it is crucial to understand how much personal loan you can get from the bank. Your loan eligibility depends on factors like income, expenses, and existing financial obligations. Banks consider these factors and assess your eligibility to check your borrowing capacity.
How Much Can I Borrow on a Personal Loan?
Banks use various methods to determine loan eligibility. This ensures borrowers can repay the loan without incurring stress.
For the most part, banks use the following two methods:
1. Multiplier Method
The multiplier method is a simple way to calculate how much personal loan you can get based on your salary. Banks use a specific multiplier, which ranges from 10 to 20 times your monthly income. This can depend on your profile and the bank’s policies.
Let’s see an illustration for understanding:
| Suppose your monthly salary is ₹50,000. Here, if the bank is using a multiplier of 15, you can be eligible for a loan amount of: Loan Amount = Monthly Salary x Multiplier So, loan Amount = ₹50,000 x 15 = ₹7,50,000 Hence, you can get a personal loan of ₹7,50,000 based on your ₹50,000 salary using the multiplier method. |
2. Fixed Obligation Income Ratio (FOIR) Method
FOIR, or Fixed Obligations to Income Ratio, is another method used by banks to determine how much personal you can get. This method considers your existing financial obligations and ensures that the total EMI does not exceed a specific percentage of your income. This can be around 50%.
Let’s consider an illustration for better understanding:
| Let’s assume your monthly salary is ₹50,000. You have existing obligations (like other loan EMIs) amounting to ₹10,000. If the bank allows a FOIR of 50%, the calculation is as follows: Total Allowable EMI = Monthly Salary x FOIR Total Allowable EMI = ₹50,000 x 0.50 = ₹25,000 Since you already have obligations of ₹ 10,000, the maximum EMI for the new loan can be: Maximum EMI for New Loan = ₹25,000 – ₹10,000 = ₹15,000 |
You can use a Personal Loan Monthly EMI calculator from IndusInd Bank to determine the loan amount for an EMI of ₹15,000. This will also depend on the loan tenure and interest rate.
Also read: the Minimum Income Requirement for Applying for a Personal Loan?
Factors Other Than Your Salary That Determine Your Loan Eligibility
While salary is a crucial factor, other elements also play a role in determining how much personal loan you can get:
1. Credit Score: A high credit score (above 750) increases your chances of getting a higher loan amount at a favourable interest rate.
2. Age: People in a middle age bracket may have a higher chance of getting larger loan amounts because of their current earnings as well as a longer earning potential.
3. Employment Status: Stable employment with a reputed company or government job has a positive influence on your loan eligibility.
4. Debt-to-Income Ratio: A lower debt-to-income ratio implies better financial health and higher loan eligibility.
5. Loan Tenure: Longer loan tenures reduce the EMI burden. This can increase the loan amount you can borrow.
Conclusion
It is crucial to understand how much personal loan you can get on your salary and the additional factors that influence your personal loan application. It helps you be prepared for the loan application and allows you to approach the process with confidence.
With IndusInd Bank’s Personal Loan offerings, you can find tailored loan offers that suit your needs. Ready to find out how much you can borrow from us?
Apply now for an IndusInd Bank Personal Loan and take the next step towards achieving your financial goals!
Disclaimer:
The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.
