Lenders decide the loan amount you qualify for based on a number of factors, including your income range.
Let’s understand in detail how different factors determine the loan amount you can qualify for.
Let’s understand everything with examples
Let’s take Rohit’s example. Rohit’s monthly finances are as stated below:
Scenario 1:
| Particular | Amount |
|---|---|
| Monthly Salary | Rs. 30,000 |
| Existing EMI | Rs. 0 |
| Maximum EMI the lender is comfortable with | Around Rs. 15,000 |
| Eligible Loan Amount (Approx.) | Rs. 7 lakh for a period of 5 years |
Let’s understand the math behind the table above:
Rohit earns Rs. 30,000 per month with no existing EMIs to pay. Since lenders prefer a minimum 50-55% debt-to-income ratio, lenders can extend a loan of up to Rs. 7 lakh for 5 years with Rs. 15,000 EMI to borrowers.
Scenario 2:
| Particular | Amount |
|---|---|
| Monthly Salary | Rs. 30,000 |
| Existing EMI | Rs. 5,000 |
| Maximum EMI the lender is comfortable with | Around Rs. 10,000 |
| Eligible Loan Amount (Approx.) | Rs. 5 lakh for a period of 5 years |
In the above case, Rohit has an existing EMI of Rs. 5,000. With an existing EMI of Rs. 5,000, Rohit's repayment capacity decreases, so does the loan amount he can qualify for. In the given scenario, lenders can extend a loan of up to Rs. 5 lakh for a period of 5 years with EMIs around Rs. 10,000.
- Existing EMI + New loan EMI= 50-55% (preferred)
- Rs. 5,000 + Rs. 10,000= Rs. 15,000 (50% of Rohit’s Rs. 30,000 salary)
Note: The credit score and other eligibility criteria also play an important role in determining the loan amount. The above calculation is an approximation.
Multiplier Method
In the multiplier method, your net monthly income is multiplied by a pre-defined multiplier (usually 10 to 24) to calculate your eligible personal loan amount. However, existing EMIs (if any), also play a crucial role in determining your loan amount.
Stated below are the personal loan amounts you can get with a Rs. 30,000 income per month based on different multipliers:
| Multiplier | Monthly Salary | Estimated Loan Amount |
|---|---|---|
| 10x | Rs. 30,000 | Rs. 3 lakh |
| 15x | Rs. 30,000 | Rs. 4.5 lakh |
| 20x | Rs. 30,000 | Rs. 6 lakh |
| 25x | Rs. 30,000 | Rs. 7.5 lakh |
