What is Take-Home Pay and How it Impacts Your Personal Loan Application
Financial uncertainties have become part and parcel of the modern life. You may try to save yourself as much as you can from such a situation; the reality is that it will come to affect you when you are least expecting it. You may have already created an emergency fund for such a situation. However, Is your emergency fund enough to take care of the urgency at hand? Now after you have handled this problem and warded it off successfully with your hard-earned savings, you realise that now you are left exposed and vulnerable to any such emergency that might again come up in a few months. What would you do then, as you have already exhausted all your savings? So, you have not thought this through, right!
You must understand that emergency funds should be used in the absolute end when you do not have any other option left with you. Before resorting to wiping out your entire savings, which might take many more years to replenish, you should look at alternate sources of funding, which offer you the flexibility of meeting your liabilities, without using your savings. One such option, which also happens to be extremely popular is to look out for various Personal Loan offers and opt for one that is suitable to your requirements.
The Process of Personal Loan
Personal Loans are unsecured loans that are offered by various lenders to help you take care of the financial emergency at hand. There is no need to produce any collateral to avail the loan,and it can be conveniently repaid in up to 60 Equated Monthly Instalments (EMIs). You can avail up to 50 Lakhs to fund your needs.
With the growing integration of technology in the financial services sector, a large number of lenders have taken the Process of Personal Loan sanction and disbursal online. You can use various online channels to check multiple Personal Loan offers and apply for the most suitable product. Online finance marketplaces like MyMoneyMantra, allow you to compare different Personal Loan offers,their interest rates, repayment tenure and other terms and conditions. You can also understand the whole process of the Personal Loan on such platforms,and after you are satisfied, you can apply for a Personal Loan of your choice through the online application form. If your profile meets the requirements of the lender, your application would be sanctioned within a few minutes,and the amount would be disbursed on the same day.
What is the Take-Home Pay Concept and How Do Banks Look at it While Processing Your Personal Loan?
If you are a salaried employee, then you must know the meaning of take-home pay. It is the net amount that you receive in your hand after taking into account deductions related to ESI, PF, TDS, and others. In short, it is the amount on the basis of which you need to manage your expenses. Therefore, its significance is enormous in regard to your personal finances.
When you Apply for Personal Loan for any future expenditure, the concept of take-home pay or net salary assumes greater significance. All lenders calculate your eligibility based on this one figure only.
- If you are a salaried individual, lenders use two different methods to calculate your eligibility for a loan and both are based on your take-home
Loan eligibility = Take home salary x Factor (based on your employer profile)
The fixed obligation to income ratio (FOIR)
FOIR = Total existing obligations/Take Home Salary x 100
- The lenders will calculate your eligibility for a loan based on any of the above two methods.
- In routine practice, when any loan has repayment tenure of over six months, higher importance is assigned to the FOIR method.
- Fixed obligations refer to the monthly payments that you must make towards your existing debts including Home Loan, Personal Loan, Credit Card or Business Loan. It is calculated to ascertain that you should have enough money left with you to take care of your regular monthly expenses in addition to pay your monthly EMIs.
- The maximum FOIR that the lenders would accept is 75%, but that is only theoretical. In practice, your FOIR should be lower than 60% for your application to be considered for any type of loan.
- When you are making application for a Personal Loan or any other type of loan, if your FOIR is already above 50%, then your application would be rejected, as you do not have adequate money to take care of your monthly expenses as well as make a payment towards your EMI commitments.
Whenever you are Filing an Application for a Personal Loan, you must carefully calculate your FOIR based on your net salary and assess your eligibility. Proceed ahead with the application, only if your FOIR is below the required threshold. Otherwise, it would be a futile exercise, which would impact your credit score.
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 70+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.
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