How Much Personal Loan Can I Get on My Salary?

Personal loans are among the most accessible forms of credit for salaried individuals, offering financial support for everything from medical emergencies and travel expenses to home renovations and debt consolidation. But one of the most common questions potential borrowers ask is: “How much personal loan can I get on my salary?”

The answer depends on several key factors, including your income, credit score, existing liabilities, employer profile, and the lending institution’s internal policies. In this article, we’ll explore how lenders evaluate personal loan eligibility based on your salary and what you can do to improve your borrowing power.

1. Understanding the Basics of Personal Loan Eligibility

Personal loans are unsecured, meaning you don’t need to pledge collateral. Because of this, banks and NBFCs (Non-Banking Financial Companies) assess the borrower’s creditworthiness primarily through income and repayment capacity. Here are the major components:

• Monthly or Annual Salary
• Credit Score (typically 650 and above for easy approval)
• Fixed Obligations to Income Ratio (FOIR)
• Employer reputation and job stability
• Loan tenure and interest rate

Let’s break these down.

2. Salary-Based Loan Eligibility: How Lenders Calculate It

Most lenders offer personal loans based on your monthly take-home salary or gross monthly income. The general rule is:

You can typically get a personal loan of up to 10 to 20 times your monthly income.

Examples:

• If your monthly salary is ₹30,000, you could get a loan between ₹3,00,000 and ₹6,00,000.
• If you earn ₹50,000, you might be eligible for ₹5,00,000 to ₹10,00,000.

However, this range is not fixed and can vary depending on:

• Your existing EMIs or financial obligations
• Your credit score
• The loan tenure you choose

3. FOIR: A Critical Metric

FOIR (Fixed Obligations to Income Ratio) measures how much of your income goes toward fixed monthly obligations (like EMIs, rent, credit card dues).

FOIR Calculation:

FOIR = (Total Monthly Obligations / Net Monthly Income) × 100

Most lenders prefer a FOIR below 40-50%. That means after accounting for existing obligations, at least 50-60% of your salary should be free to accommodate the new EMI.

Example:

Let’s say your salary is ₹40,000 per month. You already pay ₹10,000 in EMIs and ₹5,000 in rent.

• FOIR = (₹10,000 + ₹5,000) / ₹40,000 = 37.5%

If the lender’s maximum FOIR limit is 50%, your remaining eligibility for EMI is ₹5,000 (50% of ₹40,000 is ₹20,000, you already use ₹15,000). This EMI will determine your maximum loan amount.

4. Credit Score and Its Role

Your credit score plays a vital role in determining how much loan you can get and at what interest rate. A higher score indicates responsible financial behavior and improves loan eligibility.

• 750 and above: Excellent, eligible for higher amounts at lower interest rates.
• 650 – 749: Moderate, but you may get lesser loan amounts or higher interest.
• Below 650: High-risk, lenders may reject the application or ask for a guarantor.

Improving your credit score by clearing outstanding debts, avoiding defaults, and maintaining a good credit mix can significantly improve your borrowing potential.

5. Influence of Your Employer Profile

Lenders often view salaried employees from reputed or government organizations as more stable borrowers. Some lenders maintain a list of “preferred employers” and may offer:

• Higher loan eligibility
• Faster approval
• Lower interest rates

Private sector employees with irregular salaries or high job turnover may face stricter scrutiny.

6. Tenure and Interest Rate Considerations

The loan tenure also impacts your eligibility. Longer tenures (up to 5 years) reduce your monthly EMI, thus increasing your FOIR capacity and loan eligibility.

However, longer tenures may mean more interest paid over time. Balancing a manageable EMI with a reasonable tenure is key.

Also, interest rates typically range between 10% to 24% per annum, depending on your credit profile and lender policy. Lower interest rates allow for higher loan eligibility, as the EMI burden decreases.

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7. How to Increase Your Loan Eligibility

If your current income doesn’t qualify you for the desired loan amount, consider these strategies:

• Opt for a longer tenure to reduce EMI burden.
• Clear existing debts to lower your FOIR.
• Add a co-applicant with a stable income.
• Improve your credit score before applying.
• Choose the right lender, as each one has different eligibility criteria.

8. Use a Personal Loan Eligibility Calculator

Several banks and financial websites offer online loan eligibility calculators. By entering your monthly salary, existing EMIs, desired tenure, and interest rate, you can instantly estimate the maximum loan amount you may qualify for. These tools can be very useful in planning your loan.

9. Final Thoughts

While your salary plays a critical role in determining your personal loan eligibility, it’s not the only factor. Your overall financial health—credit score, existing obligations, employer stability, and loan tenure—also weigh heavily in the lender’s decision.

To maximize your loan eligibility:

• Keep your FOIR under control.
• Maintain a good credit history.
• Compare lenders to find one that aligns with your financial profile.

Always borrow within your repayment capacity, and make timely EMI payments to maintain your creditworthiness for future financial needs.

Disclaimer: The figures and calculations mentioned above are indicative and may vary depending on the lender. Always consult with your financial advisor or loan officer for personalized guidance.