Financing major expenses or fulfilling life goals often requires us to seek monetary aid. This has led to loans becoming an integral part of our lives. When buying a new home, or car, funding an education, starting a business, or debt consolidation, loans give us the necessary financial support. Many factors play a role in determining the loan terms. Your loan amount, for example, will depend on your income and expenses.
You may wonder how much personal loan can I get on my salary. In this blog, we will discuss how much loan you can get, the methods banks use to calculate the amount of credit, and much more.
Methods to Calculate Personal Loan Amounts
When determining the amount of loan you can get, banks utilise two methods to calculate; the multiplier method or the fixed obligation income ratio method, or both. Let’s discuss the two in detail:
The multiplier method is a common approach lenders use to calculate the maximum amount of credit a borrower can avail based on the salary. This straightforward calculation involves multiplying a borrower’s net monthly income by a predetermined multiplier set by the lender. The multiplier indicates how much of your salary the lender will give. The actual multiplier will depend on many factors, including the lender’s policies, creditworthiness, employment stability, and more.
Lenders set multipliers ranging from 9 to 36 for a set period, although some lenders may offer higher multipliers to borrowers with exceptional credit profiles. Here’s how you can calculate the loan amount using the multiplier method:
- Determine your annual salary: Calculate your total monthly income, including bonuses and allowances, if any.
- Select the multiplier: Depending on your profile, the lender will specify which multiplier to use.
- Multiplying: Multiply your net monthly income by the chosen multiplier to avail the maximum amount of loan that you could qualify for. For example, if your monthly salary is Rs 5,00,000 and the lender sets the multiplier of 12. Then the maximum loan amount you could get will be (5,00,000 x 12), which equals Rs 60,00,000.
Expected Eligible Loan Amount for Different Salaries
“How much personal loan can I get on my salary?” Well, using the multiplier method, you can determine the maximum loan amount you can avail of for your salary. Below is a table that shows the possible loan amount you can be eligible for depending on your salary if the multiplier is set at 27 for a tenure of 60 months.
|Rs 10,000||Rs 2.70 lakhs|
|Rs 14,000||Rs 3.78 lakhs|
|Rs 15,000||Rs 4.05 lakhs|
|Rs 20,000||Rs 5.40 lakhs|
|Rs 22,000||Rs 5.94 lakhs|
|Rs 25,000||Rs 6.75 lakhs|
|Rs 27,000||Rs 7.29 lakhs|
|Rs 28,000||Rs 7.56 lakhs|
|Rs 30,000||Rs 8.10 lakhs|
|Rs 33,000||Rs 8.91 lakhs|
|Rs 35,000||Rs 9.45 lakhs|
|Rs 50,000||Rs 13.50 lakhs|
|Rs 55,000||Rs 6.60 lakhs|
|Rs 65,000||Rs 14.85 lakhs|
|Rs 70,000||Rs 18.90 lakhs|
|Rs 75,000||Rs 20.25 lakhs|
|Rs 80,000||Rs 21.60 lakhs|
|Rs 85,000||Rs 22.95 lakhs|
|Rs 90,000||Rs 24.30 lakhs|
|Rs 95,000||Rs 25.65 lakhs|
|Rs 1,000,000||Rs 27.00 lakhs|
Note: The table above is merely an example for your better understanding. For the actual amount please contact your bank or NBFC.
Fixed Obligation Income Ratio
To answer your question,’ how much loan can I get on my salary?‘ We must understand the Fixed Obligation Income Ratio (FOIR). It calculates a borrower’s loan eligibility based on their monthly income and financial obligations. FOIR helps lenders determine whether the borrower can meet the monthly loan repayment obligations.
FOIR is a percentage that represents the proportion of your monthly income used towards the repayment of the loan. The percentage taken into account after deducting your fixed obligations is FOIR. Fixed obligations include rent payments, existing loan repayment, credit card dues, and other commitments.
Consider the following to calculate the possible maximum loan amount you can qualify for using the FOIR method:
- Determine your net monthly income: Consider your monthly income from all sources and deduct any applicable taxes or financial obligations in order to get your net income.
- Calculate the FOIR percentage: The percentage is set by the lenders, representing the maximum percentage of your monthly income that can be used for loan repayment. FOIR usually ranges between 50% to 75%. However, it can vary from one lender to the other.
- Determine your existing obligations: Calculate all fixed obligations, including existing EMIs.
- Calculating the amount: Multiply the net monthly income by the FOIR percentage and subtract all existing obligations. The resulting amount will be the maximum monthly loan repayment that your income can support.
Let’s consider your net monthly income to be Rs 60,000,
Your FOIR percentage is 50% and
Your existing obligation is Rs 15,000.
Using the FOIR method, the calculation for the maximum loan amount will be:
=(60,000 x 50%) – Rs 15,000
= Rs 30,000 – Rs 15,000
= Rs 15,000
In this example, the maximum amount that the borrower can support is Rs15,000.
How Much Personal Loan Can I Get on a Rs 20000 Salary?
If you are getting a monthly salary of Rs 20,000 per month, then you will get a loan amount of about Rs 5,40,000 if the lender sets the multiplier at 27 with a period of 60 months. Similarly, by using the FOIR method to calculate the amount, if you have a salary of Rs 20,000 with your existing obligations being Rs 5000 and your FOIR percentage at 50%, then your loan amount is
=(20,000 x 50%) – 5000
= 10,000 – 5000
= Rs 5000
How Much Personal Loan Can I Get On A Rs30000 Salary?
Have you ever wanted to know ‘how much loan can I get on a salary of Rs 30,000 per month’? Well, a salary of Rs 30,000 will get you a loan amount of Rs 8,10,000 if the multiplier set by lenders is 27 for a period of 60 months. Using the FOIR method, if your existing obligation is Rs 10,000 and the FOIR percentage is 50%, then your loan amount will be
= (30,000 x 50%) – Rs 10,000
=Rs 15000 – Rs 10,000
= Rs 5000
How Much Personal Loan Can I Get On A Rs 40000 Salary?
A salary of Rs 40,000 will get you a personal loan amount of Rs 10,80,000 if the multiplier set by the lender is 27, along with a tenure of 60 months. If the lender uses the FOIR method, your fixed obligations are Rs 15,000. Then, if your FOIR percentage is 50%, your loan amount will be
= (Rs 40,000 x 50%) – Rs 15,000
= Rs 20,000 – Rs 15,000
= Rs 5000
How Much Personal Loan Can I Get On A Rs 50000 Salary?
If you get a salary of Rs 50,000, then the personal loan you will be eligible for is Rs 13,50,000 if the multiplier set by the lender is 27. If we calculate the FOIR method, consider the monthly obligations to be Rs 15,000 and the FOIR percentage at 50%. Therefore, the loan amount is
= (Rs 50,000 x 50%) – Rs 15,000
= Rs 25,000 – Rs 15,000
= Rs 10,000
How Much Personal Loan Can I Get On A Rs 60000 Salary?
With a monthly salary of Rs 60,000, you will be eligible for a personal loan amounting to Rs 13,50,000 if the lender sets the multiplier to 27. Using the FOIR method, we can consider your fixed obligations to be Rs 15,000 and the FOIR percentage set by the lender at 50%. Therefore, your loan amount will be
= (Rs 60,000 x 50%) – Rs 15,000
= Rs 30,000 – Rs 15,000
= Rs 15,000
How Can I be Eligible for a Better Loan Amount?
There are several things that you can do in order to improve your eligibility for a better loan amount. Focusing on some of these factors will help you for a better borrowing experience in the future. Below are the tips on improving your loan amount:
- Improve your credit score: Your credit score is the primary determinant of your loan amount and eligibility. Maintaining a good credit score by making timely payments, reducing debt, and avoiding defaults can increase your chances of getting a higher loan amount. Regular checking of your credit report will help you stay alert for any mistakes you can rectify.
- Reduce existing debt: Lenders will check your debt-to-income ratio when determining your loan eligibility. Lowering any existing debt will enhance your borrowing capacity. Consider paying off outstanding loans or credit card debts before applying for a loan.
- Increase your income: A higher income will positively impact your loan amount. A higher income will provide confidence to lenders in your repayment capabilities, thereby giving you a higher loan amount.
- Maintain stable employment: A steady job and employment stability will help strengthen your loan application. Avoid making significant job changes or career shifts before applying for a loan.
- Minimise existing financial obligations: Reduce your fixed monthly obligations as it will lower your FOIR and increase your chances of getting a higher loan amount. A low FOIR indicates a greater ability to repay the loan.
- Provide collateral or a guarantor: Providing collateral will provide security to a lender, and a guarantor will provide additional assurance for loan repayment. This lowers the lender’s risk and increases your loan amount.
Comparison of Personal Loan Interest Rates Offered by Top Banks and NBFCs
While answering the question of ‘how much personal loan can I get on my salary?‘ Knowing the different interest rates is important as it will help you better plan your finances. For any borrower to get the best loan terms, amount, and experience, it is crucial to compare interest rates and loan terms offered by different banks and NBFCs. A comparison will also help you get a higher personal loan amount. Here are the interest rates offered by the top banks and NBFCs in India:
|SBI Bank||11% p.a onwards|
|HDFC Bank||10.05% to 21% p.a|
|Axis Bank||10.49% p.a onwards|
|Punjab National Bank||8.90% p.a onwards|
|Induslnd Bank||10.49% p.a onwards|
|ICICI Bank||10.75% p.a onwards|
|KreditBee||12.24% p.a onwards|
|Muthoot Finance||14% p.a onwards|
|Bajaj Finserv||11% p.a onwards|
|MoneyTap||13% p.a onwards|
|Fullerton||11.99% p.a onwards|
Note: The above-mentioned rates are subject to change with the finance market and differ marginally with respect to individual banks.
How Much Personal Loan Can I Get on My Salary from Buddy Loan?
Buddy Loan is a loan aggregator whose lenders offer personal loans from ₹ 10,000 to ₹15 lakhs. You can avail of a personal loan of any amount if you have a minimum monthly salary of at least ₹15,000 if you are a salaried individual and ₹ 25,000 if you are self-employed. Through Buddy loan, the personal loan amount you can get will depend on different lenders. Compare the different lenders to get the right loan amount that you need.
It is important to remember that the amount of personal loan you can get based on your salary will depend on the multiplier method or the FOIR method used by lenders. While your salary plays a vital role in determining your loan eligibility, other factors also affect your loan terms. You should regularly monitor additional aspects such as credit score, existing financial obligations, and employment stability to improve your loan amount for a seamless borrowing experience.