Banks and NBFCs usually offer personal loans from Rs 10,000 to Rs 40 lakhs. However, personal loan amount that a lender sanctions to an applicant primarily depends on his income and existing loan repayment obligations. Some lenders use Multiplier Method wherein they factor in applicant’s income to determine their eligible personal loan amount. Other lenders may use EMI/NMI ratio wherein they factor in applicant’s existing loan obligations to determine their personal loan amount. Let’s delve deeper to understand how these methods help lenders decide eligible loan amount for an applicant.
1. Multiplier Method helps lenders in calculating personal loan amount on the basis of a predetermined multiple (ranging anywhere from 10 to 24 times) of the applicant’s net monthly income. For instance, the maximum loan amount SBI offers on personal loans is Rs 20 lakh or 24 times NMI (net monthly income). Hence, individuals planning to apply for SBI personal loans can get up to Rs. 9.6 lakhs, provided their salary is Rs 40,000 per month.
2. EMI/NMI Ratio is the proportion of your net monthly income (NMI) spent on paying your existing EMIs as well as the EMI of the proposed loan. Lenders, usually, prefer sanctioning personal loans to applicants having EMI/NMI ratio of up to 50-55%. For instance SBI offer personal loans to applicants with EMI/NMI Ratio less than 50%. Hence, individuals planning to avail personal loans should use Paisabazaar’s Personal Loan EMI Calculator to determine optimum EMIs and loan tenures for their personal loans based on their repayment capacity to ensure their total EMI obligations remain within 50% of their net monthly income. If your EMI/NMI ratio exceeds this limit, you can extend your loan tenure to reduce your personal loan EMI or go for lower interest rates to increase your eligibility for a higher loan amount.
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Personal Loan Eligibility Calculator
Calculating personal loan amount for different lenders using the above methods can be time-consuming and tedious for many. Therefore, many lenders offer online personal loan eligibility calculator to help prospective borrowers know their eligible personal loan amount before they apply for the loan. These personal loan eligibility calculators are easy to use and give quick results on the basis of a few simple details such as the prevailing personal loan interest rate, loan tenure, user’s monthly income and his existing EMIs, if any.