Ever wondered, “How much personal loan can I get on my salary?”  The answer isn’t a simple number. You could get just ₹10,000 or a ₹10 Lakh personal loan, depending on your eligibility. 

Several factors come into play when lenders determine your eligibility for a personal loan and the maximum amount they’re willing to lend. Some lenders even offer 10 lakh loan to ₹50 lakhs. Let’s understand these factors in detail and explore strategies to improve your eligibility for a more favourable personal loan.

Factors that Shape Your Personal Loan Eligibility

Lenders are primarily concerned with your ability to repay the borrowed amount. They evaluate various aspects of your financial health before reaching a decision. Here are the key factors that influence your personal loan eligibility and loan amount:

  • Monthly Net Income: This is your primary income after taxes and deductions. A higher net income translates to a larger capacity to handle loan repayments. This can potentially increase your eligibility for a higher loan amount.

  • Existing Debt Obligations: Lenders consider your existing debt obligations, including credit card balances, EMIs for other loans, etc. A high debt-to-income ratio (DTI) – the percentage of your income consumed by debt repayments – can restrict your eligibility. This can lead to a lower loan amount being offered.

  • Credit Score: Your credit score reflects your past borrowing and repayment behaviour. A strong credit score (typically above 750) signifies responsible credit management. It increases your chances of loan approval with better interest rates and potentially higher loan amounts. Be it ₹10 Lakhs or 10000 personal loan, a good credit score can be quite helpful.

  • Employment History: Demonstrating stable employment with a reputable company strengthens your application. Lenders prefer borrowers with a consistent income source to ensure loan repayments.
  • Loan Purpose: The purpose of your loan can influence eligibility. Some lenders might offer higher loan amounts for specific purposes like education or medical emergencies compared to discretionary spending.

  • Employer Reputation: Working for a well-established organisation can positively influence your loan eligibility
  • Credit History Length: A longer credit history with a proven track record of responsible borrowing can enhance your application

  • Collateral: While personal loans are typically unsecured, some lenders might consider offering a higher loan amount if you can provide collateral like a fixed deposit.

Strategies to Improve Your Personal Loan Eligibility

Understanding the eligibility criteria empowers you to take proactive steps towards improving your chances of securing a favourable personal loan:

  • Improve Your Credit Score: This is the most crucial step. Timely repayments of existing debts and maintaining a low credit utilisation ratio can help. Try checking your credit report regularly to rectify any errors. This too can significantly improve your credit score over time.

  • Reduce Your Debt-to-Income Ratio: Pay off your existing debts whenever possible to lower your DTI and demonstrate a stronger financial position

  • Maintain Stable Employment: A consistent employment history with a reliable income source reassures lenders about your repayment capacity.

  • Reflect a Strong Financial Profile: Present clear documentation of your income, employment status, and existing debts during the loan application process.

Additional Considerations for a Successful Loan Application

Here are some other things to keep in mind when applying:

  • Compare Loan Offers: Don’t settle for the first offer you receive. Research and compare loan terms, interest rates, and processing fees from multiple lenders to secure the most competitive deal.

  • Borrow Responsibly: Only borrow what you genuinely need. Prioritise timely repayments to avoid late payment penalties and potential damage to your credit score. Don’t get a ₹2 Lakh loan if all you need is ₹15,000 just because you are eligible for it.

  • Explore Alternatives: Consider alternative options like utilising your emergency savings or negotiating payment plans with creditors before resorting to a personal loan.

Securing a personal loan hinges on your financial health and responsible credit management practices. By focusing on improving your credit score, reducing your DTI, and maintaining a stable financial profile, you can significantly enhance your eligibility. This can help you potentially secure a higher loan amount with a competitive interest rate. Remember, responsible borrowing is key. Carefully assess your needs, prioritise timely repayments, and explore alternatives whenever possible.