Personal Loan Eligibility According to Different Incomes


  • What is the Personal Loan Eligibility according to Different Monthly Incomes?
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What is the maximum personal loan amount I can get? What will be the Eligible Personal Loan Amount for me? and How do Lenders decide the final personal loan amount for individuals? – These are some most common questions that Individuals are curious about before going for a personal loan. The reason an insufficient personal loan amount will be of no use to an individual if he or she cannot fulfill the requirements. That’s why a person wants to have an early estimate of the maximum personal loan amount. One of the most important aspects that determine personal loan eligibility is the Net Monthly Income of an individual whether he or she is salaried or self-employed.

Personal Loans are unsecured loans and one of the most common products among customers. Lenders always do a thorough scrutiny of a customer’s profile before sanctioning the personal loan, and checking repayment capacity is one of the aspects of this process. Monthly income defines the repayment capacity of an individual and that’s why personal loan eligibility or say, maximum personal loan amount tends to change from one individual to another according to their monthly incomes. Apart from this, existing obligations in the form of other EMIs of Loan/Credit Card also play a crucial role.

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In this post, we will cover how the monthly income of an individual affects the Personal Loan Eligibility and what is the maximum loan amount available for people with different monthly incomes. So, keep reading.

What is the Role of EMI/NMI Ratio in Determining the Personal Loan Eligibility?

Before getting into the effect of Monthly Incomes on Personal Loan Eligibility, you should know the concept of the EMI/NMI Ratio. The EMI/NMI ratio is one of the crucial factors used by lenders to calculate personal loan eligibility. So, what exactly is this ratio? As you can see there are two elements in this ratio – EMI and NMI. Equated Monthly Installments (EMI) is the fixed monthly installments that customers make towards the repayment of the loan. Whereas, Net Monthly Income (NMI) is the disposable income in the hands of an individual received every month.

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To calculate the EMI/NMI ratio, lenders divide the total EMI amount by the Net Monthly Income of an individual and then multiply it by 100. Most of the lenders have a fixed EMI/NMI ratio to calculate the maximum personal loan amount. They decide the loan amount in a way that your EMI/NMI ratio does not cross the predefined limit. Let’s understand it via an example.

Let’s say the monthly income of an individual is INR 30,000 and he has been paying an EMI of INR 9,000.

According to this detail, his EMI/NMI ratio would be (9,000/30,000)*100 = 30%

Here, one thing you need to remember that lenders have different EMI/NMI ratios according to different monthly income slabs. So, the most important thing that will determine the Eligible Personal Loan Amount will be your monthly income. An individual with a higher monthly income can get a higher personal loan amount. However, he or she should not have any existing obligations (Loan or Credit Card EMIs). Otherwise, the loan amount could reduce.

What is the Personal Loan Eligibility of Individuals with Different Monthly Incomes?

Now, you have sufficient information about the EMI/NMI ratio, we would be talking about how different monthly incomes affect the Personal Loan Eligibility. Lenders check the monthly income to be sure of the repayment capacity of an individual. Also, lenders have a fixed criterion about the monthly income.

To understand the effect of Monthly Incomes on personal loan eligibility, we are taking examples of different monthly incomes of INR 25,000, INR 40,000, INR 50,000, INR 70,000, and INR 1 lakh. According to these incomes, we will see what is the maximum loan amount an individual can get. We will be taking the scenario where the individual has no existing obligation.

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So, first, we would be taking the monthly income of INR 25,000 which is considered to be a low-income category among lenders. So, an individual who is earning INR 25,000 per month wants to opt for a 5-year personal loan at an interest rate of 15% per annum. What would be the maximum personal loan amount?

Well, with this monthly income, the maximum EMI/NMI ratio can be 30%. So, the maximum EMI that he can afford after spending on other monthly expenses will be INR 7,500.

And with this EMI amount of INR 7,500, the maximum personal loan amount he can get is a shade above INR 3.15 lakh. Remember, the individual has no existing monthly obligations. On having any, the loan amount will reduce accordingly.

Similarly, we are showing personal loan eligibility according to the different incomes in the below table. Please do check.

Personal Loan Eligibility According to Different Monthly Incomes (With Nil Existing Obligations)

Net Monthly IncomeLoan TenureRate of Interest (in per annum)EMI/NMI RatioAffordable EMI AmountEligible Personal Loan Amount (approx.)
INR 25,0005 years15.00%30%INR 7,500INR 3,15,000
INR 40,0005 years15.00%40%INR 16,000INR 6,75,000
INR 50,0005 years15.00%40%INR 20,000INR 8,40,000
INR 70,0005 years15.00%50%INR 35,000INR 14,50,000
INR 1 Lakh5 years15.00%55%INR 55,000INR 20 Lakh

Note: All these calculations are made based on the same interest rate and for Illustration Purposes. The final loan amount could vary based on the interest rate it charges on the loan amount.

So, from the above table, you can see clearly when an individual has a higher monthly income, lenders offer them a higher loan amount as compared to an individual who has a lower monthly income. Also, lenders tend to provide a higher EMI/NMI ratio to people with higher incomes as they can manage their expenses better as compared to a person who will have a little income left after paying the personal loan EMI.

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Other Factors that Affect Personal Loan Eligibility

As we said monthly income is the most crucial factor which will determine your personal loan eligibility. But there are a few other factors also that determine your personal loan eligibility – Applicant’s Age, Credit Score, Working Experience and Residing City. Lenders always check the applicant’s age to determine the adequate number of working years remaining. The eligibility criteria related to age tends to vary from one lender to another.

Similarly, people with a high credit score do have the chance to get a higher loan amount as compared to people with low scores. A good credit score indicates a responsible repayment behavior and a lender doesn’t want to offer a loan to an individual who has a bad repayment behavior. Lenders also check the overall work experience of an individual to have an estimate of his or her financial stability. More working years indicate better financial stability and vice versa.

Lenders also have different minimum income criteria according to different cities. For example, the minimum monthly income criteria for an individual living in a Metro City will be higher than a non-metro city. So, it would be advisable to check the monthly income condition of the respective lender when checking your personal loan eligibility.

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