How Much Personal Loan Can Your Salary Get You?
A personal loan is a financial tool that allows you to borrow money to cover unexpected expenses. The amount of personal loan that you can take based on your salary depends upon the lender’s policies. But the typical methods used by Lenders are: multiplier method or the fixed obligation income ratio (FOIR) method to calculate how much you can borrow. In this blog, we will break down how lenders find out your personal loan capacity, how much you can borrow based on your salary, and tips to improve your eligibility.
Methods to Determine Personal Loan Eligibility
The two primary methods used by lenders to figure out the maximum loan amount are:
Multiplier Method
Using this method lenders multiply your net monthly income (NMI) by a fixed number (usually 10 to 30 times), depending on your credit profile and the lender’s policies.
Example:
If your monthly salary is ₹40,000 and the lender applies a multiplier of 20, you may get a loan of: ₹40,000 × 20 = ₹8,00,000
The multiplier method differs because of the following factors:
- Your employer’s reputation
- Credit score and financial history
- Your profession (salaried/self-employed)
Fixed Obligation to Income Ratio (FOIR) Method
In this method, lenders consider your existing financial obligations (such as EMIs, rent, and bills) to determine if you can afford a new loan. Most banks prefer your total EMI payments to be within 40-55% of your monthly income.
Example:
- If your salary is ₹50,000 and the lender follows a 50% FOIR, then your total loan EMIs (including existing loans) should not exceed ₹25,000.
- If you already have an EMI of ₹10,000, then your maximum EMI for a new loan can be ₹15,000, which determines your loan amount based on tenure and interest rate.
How Much Loan Can You Get Based on Salary?
|
Monthly Salary |
Maximum Loan Amount |
|
₹15,000 |
₹2,25,000 |
|
₹20,000 |
₹3,00,000 |
|
₹25,000 |
₹3,75,000 |
|
₹30,000 |
₹4,50,000 |
|
₹40,000 |
₹6,00,000 |
|
₹50,000 |
₹7,50,000 |
|
₹60,000 |
₹9,00,000 |
|
₹70,000 |
₹10,50,000 |
|
₹80,000 |
₹12,00,000 |
|
₹90,000 |
₹13,50,000 |
| ₹1,00,000 |
₹15,00,000 |
NOTE: These are estimated figures and may vary based on lender policies. For more information, you can get in touch with us to secure the best loan options.
Factors That Affect Your Personal Loan Eligibility
While salary is an important factor to evaluate your personal loan capacity but lenders also depend upon multiple factors to evaluate your profile:
1. Credit Score
If your CIBIL score is above 750, you’re more likely to get loan approval at better interest rates. But if it’s below 600, getting approved can be tough.
2. Employment Type & Stability
Salaried employees in MNCs or government jobs get easier loan approvals, while self-employed individuals need income proof and a strong business track record.
3. Debt-to-Income Ratio
Lenders check how much of your income is already being used to pay off existing EMIs. If over 50% of your salary is going toward debts, your loan eligibility decreases.
4. Loan Tenure & Interest Rate
A longer tenure (up to 5 years) lowers EMIs but increases total interest, while a lower interest rate (10-15%) helps you afford a higher loan without extra financial strain.
How to Improve Your Loan Eligibility?
Want to improve your chances of getting approved for a higher loan amount at better terms? Here’s what you can do:
- Keep Your Credit Score High: : Pay your EMIs and credit card bills on time to maintain a healthy credit score.
- Opt for a Longer Loan Tenure : : Choosing a 5-7 year tenure lowers your monthly EMI, making repayments more manageable.
- Clear Existing Debt : : Settle credit card dues and ongoing loans before applying for a new one.
- Apply with a Co-Applicant: : Adding a spouse or family member increases your combined income, improving eligibility.
- Negotiate for Better Terms: : A higher salary and stable job can help you secure lower interest rates and a bigger loan amount.
Find the Right Personal Loan with Us
Knowing how much you can borrow based on your salary helps you plan better before applying for a personal loan. Factors like the multiplier method, FOIR, credit score, and debt-to-income ratio play a big role in determining your eligibility and interest rates. Want the best deal? Compare top lenders and secure the right personal loan for your needs with us!
