There are two methods to determine an applicant’s eligible personal loan amount - Multiplier Method and EMI/NMI Ratio. Banks and NBFCs may use either of these two methods of calculation or both to determine personal loan amount eligibility for an applicant.
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How Much Personal Loan Can I Get on a Salary of Rs. 20,000 or Lower?
Maximum Personal Loan for Salaries Less Than Rs. 20,000 as per Multiplier Method>
| Monthly Salary | Maximum Loan Amount |
|---|---|
| Rs. 10,000 | Rs. 1.50 Lakh |
| Rs. 11,000 | Rs. 1.65 Lakh |
| Rs. 12,000 | Rs. 1.80 Lakh |
| Rs. 13,000 | Rs. 1.95 Lakh |
| Rs. 14,000 | Rs. 2.10 Lakh |
| Rs. 15,000 | Rs. 2.25 Lakh |
| Rs. 16,000 | Rs. 2.40 Lakh |
| Rs. 17,000 | Rs. 2.55 Lakh |
| Rs. 18,000 | Rs. 2.70 Lakh |
| Rs. 19,000 | Rs. 2.85 Lakh |
Note: For the above calculation, existing loan repayment obligations has been considered to be zero. For the multiplier method, the maximum loan amount is 15 times the NMI.
- EMI/NMI Ratio: Under this method, lenders calculate the proportion of an applicant’s net monthly income (NMI) that goes into paying his loan EMIs, including the EMI of the proposed loan. Lenders usually prefer approving personal loans of applicants having EMI/NMI ratio of up to 50-55%.
Factors that determine an applicant’s EMI/NMI ratio includes his net monthly income, tenure and interest rate. Changing salary or monthly EMI obligations in a short time can be challenging. However, applicants can choose to extend their loan tenure or avail low interest rate personal loans to reduce their EMI/NMI ratio and thereby, improve their eligibility to avail a higher personal loan amount.
Other Factors that Affect Personal Loan Eligibility
Besides your income and repayment capacity, several other factors that affect your personal loan eligibility are as follows:
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The APR (Annual Percentage Rate) of a personal loan is its annualised cost of borrowing, which includes the interest rate as well as the processing fees, documentation fees and other fees charged during the loan origination. The APR is expressed in the form of a percentage and thus, allows personal loan applicants to detect personal loan schemes offered at lower interest rates but with higher processing fees and/or other charges.
The APR of personal loans usually ranges between 11.29% to 35%. For example, assume that you have availed a personal loan of Rs. 5 lakhs @ 10.50% p.a. with a repayment tenure of 5 years. The processing fee charged for this loan is 1.5% of the loan amount, which amounts to Rs 7,500. Therefore, the total borrowing cost of your personal loan will be Rs 1,52,317 and its APR will be 11.16%.
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