Most banks and NBFCs consider two methods, the multiplier method and the EMI/NMI ratio, to calculate the applicant’s eligible personal loan amount.
Multiplier Method
In the multiplier method, an applicant’s Net Monthly Income (NMI) is multiplied by a set number to calculate an applicant’s personal loan amount eligibility. This multiple can be anywhere between 10 to 24 times the applicant’s NMI. For instance, SBI considers a 24-times NMI to calculate the applicant’s eligible loan amount. Therefore, the eligible loan amount for SBI Personal Loans would be Rs 12 lakh. However, the applicant’s existing EMIs and other debt obligations also play an important role in calculating your loan eligibility.
EMI/NMI Ratio
Apart from NMI, lenders consider the EMI/NMI Ratio. The EMI/NMI ratio indicates the proportion of the applicant’s net monthly income allocated towards repayment of their existing and proposed EMIs. Lenders usually prefer sanctioning personal loans to applicants having an EMI/NMI ratio of up to 50-55%.
