In the present day scenario, where both, financial needs and obligations are both ever rising, Personal Loans have become the need of the hour. Owing to their ready availability, quick disbursals, unrestricted use, and unsecured nature, Unsecured Personal Loans have become the go-to credit alternative for one and all.
However, since a Personal Loan is unsecured, the lenders often need one to have a high credit score, preferably 700 and above, to be assured of the applicant’s financial discipline and conduct. Besides, it is also expected of the applicant to have steady employment, complete with a minimum level of monthly income which often acts a proof of the borrower’s ability to repay the loan in a timely and efficient manner.
In most cases, a poor CIBIL score, or a low income can result in comparatively higher rates of interest pertaining to the increased risk propensity of the lender. In this case, it is more or less obvious for you, as a prospective borrower to think – “How much should I be earning to get a Personal Loan?”
In a vast majority of cases, the minimum income requirements for applicants who need Personal Loans differ from lender to lender. While some lenders may need you to have a high monthly income, some others would readily offer the loan even if your income in on the lower end of the spectrum. Then, there are some others, who solely base the maximum Personal Loan amount on your monthly income.
For instance, the maximum SBI Personal Loan amount that you can avail is 12 times your monthly income. Besides, the minimum income requirements also vary on the basis of the place of your residence. In the case of Metro Cities, the lenders generally expect you to have a minimum income of Rs. 25,000 per month, while the same for Tier 1 cities is usually Rs. 20,000 to Rs. 22,000. If you happen to belong to a small town or city, which is classified as Tier 2, the minimum income requirement is often as low as Rs. 18,000.
That being said, you must be aware that online lending agencies are often more lenient than traditional banks and non-banking financial companies (NBFCs) when it comes to the lending criteria. This implies, that even when your income is as little as Rs. 10,000 to Rs. 15,000.
As a Personal Loan applicant you must understand, that apart from your income numerous other aspects play a significant role in the approval of your application, that too, on favourable terms. Let us discuss these aspects in greater detail.
Also known as DTI, the Debt to Income Ratio is essentially the ratio of your monthly debt as compared to your income. As a rule of thumb, a debt to income ratio of 40% is considered ideal, since you still have 60% of your gross income to manage your living expenses. As you may guess, the lower the DTI, the better it is for your personal finances.
If you need a Personal Loan, and have no existing debts to take care of, you can expect to get an approval for a loan amount which will result in less than 40% of your income going towards the equated monthly instalment (EMI).
More often than not, lenders prefer to hand out loans to borrowers in the age group of 21 to 55 years. Here, the younger you are, the better is your ability to repay the loan, and hence, the more eligible you become. Most lenders offer credit to people above the age of 50 only if the borrower is 60 years or less in age, at the time of completion of the loan tenure. The chances of getting a loan approval for applicants above the age of 60 are rather slim.
As mentioned earlier, a steady stream of income is imperative to get an approval on your Personal Loan application, and that is something that is more or less solely dependent on your employment status. It is for this reason that most lenders are stringent about the borrowers having a minimum of two years of experience in the same field, with the minimum number of switches possible, from one employer to another. The same holds true for business owners and self-employed individuals.
Then again, people who enjoy a job in one of the more reputable organisations or with a practice in some coveted professions such as medicine, law, CA, and so on, are considered more creditworthy than others. Consequently, their loan applications warrant quicker approvals.
In order to get a Personal Loan application approved, it is almost mandatory to have a good credit score. Anything less than the score of 700 may put a question mark on your repayment behaviour, thus making the lender wary of considering your application. Hence, it is highly recommended for you to check your score, before applying for a Personal Loan. If for some reason, your score is lower than ideal, then we suggest you first take the requisite steps to improve the score and only then apply for this much-needed credit.
We hope that you now have a fair idea of how much should be your minimum monthly income for you to qualify as an eligible Personal Loan applicant. However, in addition to your income, you must also give due consideration to all the other relevant aspects to prove your creditworthiness to the lender!
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