Personal loan Eligibility for Banks in India

Personal Loan Eligibility Criteria

The basic criteria for personal loan eligibility for most of the banks and NBFCs are:

How to check Personal Loan Eligibility?

Personal loan eligibility can be calculated in two ways:

• Multiplier Method
• FOIR (Fixed Obligation to Income Ratio)

Multiplier Method – Under this method, banks apply a multiplier to your net take home salary to calculate your loan amount eligibility. The multiplier applied is a function of your take home salary and company profile. Higher the salary and more reputed the company, higher is the multiplier and your loan eligibility. Generally, banks apply a multiplier of 9 to 27, and these multipliers are defined for different levels of salary and internal categorization of companies by the bank. Higher the category to which a company belongs, higher will be the loan amount eligibility and lower the personal loan rate of interest.

Illustration: Mr. A has a monthly take-home salary of Rs 40,000 with no other EMIs to pay. He works with a company which is a Category A company as per the bank. In this case, the bank applies a higher multiplier of 20 to calculate his loan amount eligibility. At a multiplier of 20, the loan amount Mr. A will be eligible for is Rs 8 Lakh (Rs 40,000*20). This means Mr. A can get a maximum amount of Rs. 8 Lakh from the bank.

FOIR (Fixed Obligation Income Ratio) – Under this method, your loan amount eligibility is calculated based on the maximum EMI or monthly installments you can service with respect to net income after accounting for other fixed expenses such as rent and EMIs. Banks or NBFCs generally accept 50 – 75% of your net income as EMI, existing fixed obligations and credit card outstanding. If the obligations exceed bank’s norms, then the bank will either reduce your loan amount or will increase the tenure of your loan.
The bank calculates your eligibility such that fixed obligations (including the EMI for the new loan) do not exceed 50% of your income. This percentage can vary from lender to lender. For high income borrowers, this can range upto 65%.

Illustration: Mr. A has a take home salary of Rs. 50,000 and he wants to take a personal loan. He has no other fixed obligations or EMIs to pay. The bank has a maximum FOIR requirement of 50% and hence, in this case, the bank will lend an amount where maximum EMI is restricted to Rs.25,000 (50% of Mr. A’s salary), which is at the lowest rate of interest of 10.50% and longest tenure of 6 years, translates in to a loan amount of ₹ 13.31 Lakh.
In the same example, if Mr. A has another home loan EMI to pay of Rs. 10,000, then he will be eligible to take a personal loan of amount where his monthly EMI does not exceed Rs. 15,000. In this case, Mr. A is eligible to take a maximum loan of ₹ 5.33 Lakh at the longest tenure of 6 years and lowest rate of interest 10.50%

Banks will calculate your eligibility under the multiplier and FOIR method and will approve a loan amount which is lower of the loan eligibility calculated under the two methods.

You can use the personal loan eligibility calculator to assess your present eligibility in comparison to what you are looking for.

What is Personal Loan Eligibility Calculator

Personal loan eligibility calculator is a free, easy to use tool that provides clarity on the loan amount you are eligible for at various rates of interest and the tenure best suited for you. Availing a personal loan is tricky, especially when you are not sure about your eligibility. When you want a high amount but do not have a very strong credit history, then getting the desired amount may prove to be difficult. That is where the use of a personal loan eligibility calculator comes in. Personal loan eligibility is calculated based upon your monthly income, current EMIs, and the type of organization you are currently working for, and how many years of working experience you have. All these are essential factors in ascertaining your eligibility for the loan amount you desire. It calculates the maximum loan amount you are eligible based on the maximum EMI you can afford.
A complete assessment is done on all the above-mentioned factors to determine the best offers or loan deals for you. You can use a personal loan eligibility calculator to get a clear picture of the probable loan deals you can get, and the best part about it is that it's not counted as a loan application.

Illustration on Personal Loan

FAQ on Personal Loan Eligibility Calculator

What is the personal loan eligibility for salaried employees?

Loan eligibility for salaried employees depends on factors such as:

• Age: Minimum 21 years and maximum 65 years (may vary bank to bank)
• Salary:  Minimum 18,000 per month
• Total working experience: Minimum 3 years

What should be the minimum and maximum age to get personal loan?

The minimum age limit to apply for a loan should be 21 years. Maximum age can go up to 60 years (salaried employees) and 65 years (self employed professionals) at the time of loan maturity. However, age varies from bank to bank.

How does my income determine my eligibility?

Your monthly income to get a personal loan should be at least Rs. 25,000. However, some banks give loans to individuals with salary less than Rs. 25,000. Banks also follow a different limit to calculate the ratio of your fixed obligations to your monthly income. Suppose, your income is Rs. 30,000, then bank calculates your eligibility such that fixed obligations do not exceed 50% of your income. However, if your income is more than Rs. 40,000 per month, then banks will allow higher fixed obligations to income ratio of 65%, which means that your fixed expenses (including rent and other EMIs) can be up to 65% of your income to be eligible for a loan from a bank. Higher the income, the better are the chances to get high loan amount.

You can use the personal loan eligibility calculator to check your current eligibility for home loan offers from various banks and NBFCs.

Does company profile affect my eligibility for a personal loan?

Yes, company profile affects your loan eligibility. Good company profile and high salary increase your eligibility to get a personal loan at a low rate of interest. There are few banks which also offers loan to non-categorized companies employees but at high interest rates.

Do my existing loan obligations affect loan eligibility?

If you are already paying an EMI for any existing loan then your eligibility for the new loan applied will be comparatively low.

How can I improve my eligibility for personal loan?

You can improve your eligibility for a personal loan by doing the following things:

• To increase your eligibility, pay off your running debts first
• Pay your EMIs or other obligations on time to improve credit history and to negotiate with banks in the future to get a high loan amount
• Transfer your existing loans to a lower rate to reduce your existing EMI and to get new loan of higher amount
• Using a personal loan eligibility calculator can help you assess your present status as compared to what you would like to achieve.

How much personal loan can I get on my salary?

Banks ask for a minimum income of Rs. 25,000 for a personal loan. However, some banks give loans for a salary less than Rs. 25,000. Your loan eligibility is calculated based on the ratio of your fixed obligations to your monthly income. If your income is less than 30,000, then the maximum obligations cannot exceed 50% of your monthly income. However, for a higher income, the obligations to income ratio can go upto 65%. If you have a higher income, then there are better chances to get a higher loan amount.

How much loan can I get if my salary is 40000?

The personal loan amount depends on FOIR and multiplier. The lower of these two factors are considered as the eligible loan amount. Suppose the bank gives a loan at a FOIR of 50%, and the maximum multiplier is 20, and you do not have any EMI going on. The maximum amount you can pay as EMI For personal Loan is Rs. 40,000*50% = Rs. 20,000. If you take a personal loan for a maximum of 5 years, then your loan amount will be Rs. 20,000*12*5 = Rs. 12,00,000. However, the multiplier is 20, then the loan amount will be Rs. 40,000*20 = 8,00,000. Therefore, the amount you will get on Rs. 40,000 salary is Rs. 8,00,000.

How much loan can I get if my salary is 60000?

The personal loan amount depends on FOIR and multiplier. The lower of these two factors are considered as the eligible loan amount. Suppose if your FOIR is 60% and the multiplier is 20, and you do not have any EMI going on. Then, the maximum amount you can pay as EMI is Rs. 60,000*60% = Rs. 36,000. If you take a personal loan for a maximum of 5 years, then your loan amount will be Rs. 36,000*12*5 = Rs. 21,60,000. However, the multiplier is 20, then the loan amount will be Rs. 60,000*20 = 12,00,000. Therefore, the amount you will get on Rs. 60,000 salary is Rs. 12,00,000.

Apart from income, eligibility depends on various other factors. Thus, it is suggested to use the personal loan eligibility calculator for better assessment.