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How much Personal Loan Can I Get on 20000 Salary in India?

Updated on: 24 Feb 2022 // 39 min read // Personal Loans
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How much Personal Loan Can I Get on 20000 Salary in India?

Searching for a personal loan, but not sure about how much personal loan on Rs. 20,000 salary can be availed? Well, a personal loan eligibility calculator can assist you with this!

In the earlier times when a prospective borrower would apply for a personal loan, all would depend upon the lending institution. After a long wait, a loan rejection letter citing non-eligibility would pop up. But the advent of technology has paved the way for financial tools like a personal loan eligibility calculator, an EMI calculator, and a credit score calculator. 

These not just cut down on the long processing time but also help the borrower take a well-planned and informed decision. Thus, the question, “How much personal loan can I get on Rs. 20000 salary?” can now be answered with certainty before applying for the personal loan.

Note: Check different Lenders of Personal Loan for Low Salary

How Much Personal Loan Can I Get on 20000 Salary?

The personal loan eligibility calculator helps the applicant calculate the maximum amount of personal loans that can be availed. It is linked to his/her repayment capacity. The financial institution performs a comprehensive assessment and helps ascertain the amount through a personal loan eligibility checklist. 

 To ascertain the maximum eligible personal loan for Rs. 20,000 salary can have two situations:

  • The applicant has ongoing liabilities
  • The applicant has no ongoing liabilities and is a first-time borrower

Situation 1

The applicant has ongoing liabilities (FOIR (Fixed Obligation to Income Ratio) or Debt-Income Ratio)

In case the applicant has an active loan(s) and is repaying EMIs on those loans, the amount of a personal loan for Rs. 20,000 salary will be calculated using the FOIR method. FOIR, Fixed Obligation to Income Ratio, is also called the debt-income ratio. 

To ascertain the maximum amount of personal loan that the applicant is eligible for, the lending company will subtract the total amount of current EMIs from the net monthly income, i.e. Rs. 20,000. Ideally, a FOIR of the applicants must be lower than 50% of the in-hand salary. The lower the FOIR, the better it is as it indicates that the applicant has sufficient funds in hand to repay additional loan obligations.

Thus, if you have a monthly salary of Rs. 20,000 and have ongoing EMIs of around Rs. 12,500, your loan application will be rejected. This is because the remaining salary will be used to fund day-to-day living, and thus the chances of default in repayment of additional EMI will be very high.

Typically, about 40% of the income after subtracting the ongoing EMI amounts is the maximum amount of personal loan an applicant is eligible for. For instance, if you have a monthly salary of Rs. 20,000 and ongoing EMIs amounting to Rs. 5,000, your eligibility for a personal loan will be up to Rs. 3,60,000 (40% of 15,000 X 60 months (or the desired loan term).

Situation 2 -

The applicant has no ongoing liabilities and is a first-time borrower (Net Monthly Income Method or the Multiplier Method)

The maximum amount of personal loan eligibility for applicants who are first-time borrowers and have no ongoing liabilities is ascertained using the Net Monthly Income Method or the Multiplier Method. 

As the applicant has no other fixed monthly liability or ongoing EMIs to honour, the maximum amount of personal loan he is eligible for will be a multiple of his net monthly income (NMI). The value of the multiplier applied will range between 27 and 30 times of the NMI and depends upon factors like credit score, occupation, work experience, age, etc. Thus for a Rs. 20,000 monthly salary, the applicant will be eligible for a personal loan ranging between Rs. 5,40,000 and Rs. 6,00,000. The same has to be repaid in a maximum of 60 months. 

Eligibility Criteria to Avail Personal Loan on Rs. 20,000 Salary

When contemplating taking a personal loan, the first thing that comes to mind is - How much personal loan can I get on a 20000 salary? Well, it all depends upon meeting the eligibility conditions. Applicants who meet all the pre-check conditions are eligible for the maximum amount of personal loans.

The eligibility criteria to avail personal loan are:

General RequirementsConditions and Limits
Age

The applicant must be between 21- 65 years of age.

The age of the applicant helps determine the maximum loan term as the personal loan should be repaid before the applicant retires.

Employment Status

Almost everyone including salaried, self-employed professionals and non-professionals, student, retired officers, etc. are eligible for a personal loan.

However, every category has different personal loan eligibility criteria.

Salaried individuals are the most preferred because of their fixed income. 

Work ExperienceApplicants must have been working for at least 2-5 years, of which the last year should be with the existing employer or in the same profession.
Monthly Income

A minimum monthly income of Rs. 15,000 is required for salaried individuals

A minimum income of Rs 20,000 is required monthly for self-employed individuals

The Higher the monthly income, the higher will be the personal loan eligibility.

Credit ScoreA minimum credit score of 600 is required for personal loan approval. A credit score which is equal to or higher than 750 can help you seek a personal loan at favourable terms and conditions.
Debt-Income RatioThe Debt-Income Ratio should be less than 50%. This indicates the ratio between the total amount of ongoing liabilities and total income. It helps evaluate the repayment capacity of the applicant.

 Documents Required to Avail Personal Loan

The documents required to avail a personal loan on a Rs. 20,000 salary are

Identity ProofAddress ProofIncome Proof

Mandatory

  • PAN Card

 

Any one of the following

·         Aadhaar Card

  • Valid Indian Passport
  • Valid Voter ID
  • Valid Driver’s License

 

 

Any one of the following

  • Aadhaar Card
  • Valid Indian Passport
  • Valid Voter ID
  • Utility Bills (Electricity, Water, Gas) not more than 2 months old
  • Valid Driver’s License

 

 

Salaried

  • 3-month salary statement
  • 3-month bank account statement showing salary credit
  • 2-year ITR copy

 

 

Self-Employed

  • 3-month bank account statement of business account
  • 2-Year ITR
  • 2-Year Balance Sheet and Profit and Loss Account audited by CA

 Best Personal Loan Interest Rates in India 2021

Name of Lending CompanyRate of InterestProcessing Fee
Best Bank Personal Loan Interest Rate and Charges
SBI Bank08.50% p.a. onwards1% of the loan amount is subject to minimum of Rs. 1,000 and maximum of Rs. 10,000 (GST extra)
IDFC First Bank10.49% p.a. onwards3.5% of the loan amount + GST
ICICI Bank10.50% p.a. onwardsUp to 2.5% of the loan amount + GST
HDFC Bank10.50% p.a. onwardsUp to 2.5% of the loan amount + GST, subject to a maximum of Rs. 25,000 for salaried individuals
Yes Bank                               13.99% p.a. onwardsUp to 2.5% of the loan amount + GST, subject to a minimum of Rs. 999 + GST
Best NBFC Personal Loan Interest Rate and Charges
Tata Capital10.99% p.a. onwards2.75% of the loan amount + GST
Fullerton India11.99% p.a. onwardsBetween 0% and 6% of the loan amount
Bajaj Finance13.00% p.a. onwardsUp to 4% of the loan amount + GST
India Bulls13.99% p.a. onwards3% of the loan amount + GST
    

Steps to Avail Personal Loans with Salary up to Rs. 20,000

The process to avail of a personal loan with Rs. 20,000 salary is simple and easy. The steps involved are:

  • Check Eligibility – Visit the lending company’s official website and check your loan eligibility using the personal loan eligibility calculator. You will be required to provide details regarding your age, occupation, and income. The maximum amount of loan eligibility will flash instantly.
  • Select Loan Plan – Once you are eligible for the loan, select the loan plan. The maximum loan amount cannot increase the eligibility limit. Choose the loan term wisely.
  • Submit documents – the list of required documents will appear on the screen. Upload images of the necessary documents and wait until the document verification process is complete. In case required, the lending institution can ask for more documents.
  • Get Loan Approval and Disbursal – After the document verification process is completed, your loan will be approved. Loan disbursal will happen within 24 hours.

How can I Improve my Eligibility for a Personal Loan in India?

Fulfilling the lender’s eligibility conditions ensures personal loan approval on favourable terms and conditions. Listed below are a few ways that can help you improve your eligibility for a personal loan:

  • Maintain a Good Credit Score – Pay off your existing debts and financial obligations on time. Any delay or default in the repayment will reduce your credit score significantly.
  • Do Not Apply For Many Loans At a Time - Applying for more than one loan at a time will lead to loan rejection, causing a dip in the credit score.
  • Keep Your Documents Ready – Go through the list of documents required before you apply for the loan. Ensure that you have the required documents handy.
  • Include Income From All Sources – The eligibility of a personal loan is based on the repayment capacity of the applicant. To qualify for a higher loan amount, include income from all other sources when applying for a personal loan. Keep supporting documents ready to validate your stance.
  • Apply With Co-applicant – Applying with a co-applicant who has a good credit score can improve eligibility for a personal loan in India.
  • Avail loan for a smaller loan term – Opting for a shorter loan term increases the personal loan eligibility.
  • Apply for a Low Principal Amount – The chances of rejection are higher if you apply for really high-value personal loans. Keep the principal amount low to improve chances of loan eligibility.
  • Pledge Collateral – Personal loans are otherwise unsecured loans, but by pledging collateral, the borrower can significantly improve the eligibility of a personal loan.
  • Choose the Right Lender – Different financial institutions have different sets of eligibility conditions. Thus, it is important to find a lender with eligibility conditions you can fulfil. This will improve your chances of being eligible for a higher amount of personal loan.

 FAQs

✅How much personal loan can I get on a Rs. 20,000 salary?

Case 1 - In case you have ongoing liabilities

You can avail of a personal loan of up to Rs. 3.6 lakh for a salary of Rs. 20,000 with ongoing liabilities presumed at Rs. 5000 per month. (40% of 15,000 X desired loan term (60 months).

Case 2 -No ongoing liabilities and applicant is a first-time borrower

For a Rs. 20,000 monthly salary, the eligibility for a personal loan ranges between Rs. 5.4 lakh and Rs. 6 lakh for borrowers who have no existing loan obligations. The loan eligibility corresponds to a 60 month loan period.

✅Can I get a personal loan with a low credit score?

Best lending companies typically accept a credit score of 750 and above. They offer the lowest interest rates to such applicants. However, there are a few lending institutions that accommodate people with a lower credit score.

✅What are the eligibility conditions to avail personal loan on Rs. 20,000 salary?

Eligibility conditions to avail personal loan on a Rs. 20,000 salary are:

  • Age between 21 - 65 years
  • Employment status – salaried or self-employed
  • 2-year work experience with last one year with the same employer
  • Credit score above 750
  • A Debt-Income ratio less than 50%

✅How can I improve my personal loan eligibility in India?

To improve your personal loan eligibility in India, keep the following points in mind

  • Maintain a Good Credit Score
  • Do Not Apply For many Loans At a Time
  • Keep Your Documents Ready
  • Include Income From All Sources
  • Apply With Co-applicant
  • Avail loan for a smaller loan term
  • Apply for a Low Principal Amount
  • Pledge Collateral
  • Choose the Right Lender

✅How to avail personal loans with a salary up to Rs. 20,000?

Steps to avail personal loans with Rs. 20,000 salary are:

  • Check Eligibility
  • Select Loan Plan
  • Submit Documents
  • Get Loan Approval and Disbursal