Have you ever experienced a financial crisis due to rising product costs or demand? Considered applying for a loan but were put off by the lengthy and complicated procedure? If your answer is yes, you’ve come to the right place.
This post will discuss the definition of a personal loan, how much you may acquire in India, and the related terms and circ*mstances. Continue reading to stay up-to-date on personal loan limits in India. Let’s begin with the definition of personal loans.
Definition of a Personal Loan
In simple terms,a personal loanis an unsecured loan.You can use it to pay various costs such as schooling, marriage, health care, etc.
This loan does not need any collateral. But the risk for lenders is higher than with a secured loan. According to Reserve Bank of India statistics, the amount borrowed from personal loans has risen considerably in recent years. Personal loan borrowings were Rs. 19.33 lakh crore as of June 2018, up from Rs. 5.89 lakh crore in 2010.
Features of Personal Loans
Let’s go through some aspects that will help you better comprehend the definition of personal loans.
- A personal loan does not need any security. It is determined by your creditworthiness and job history, as represented in your credit score.
- Banks don’t do end-use surveillance on the amount issued as a personal loan.
- A variable payback period spans from 1 to 60 months. It depends on your needs.
- A personal loan may be obtained with little paperwork.
- Within 48 to 72 hours, the sum of a personal loan is credited to your account.
Personal Loan Amount Calculation Methods
- Multiplier Method
Many lenders use the multiplier method to assess whether a person can take out a personal loan. This test is used to identify the personal loan amount based on a certain multiple of the applicant’s monthly net income.
Depending on the lender and the applicant’s monthly income, the multiple could range from 10-24 times the applicant’s monthly income. So, if your creditor offers a loan amount 24 times the NMI (Net Monthly Income), and your NMI is 50,000, you can get a loan of Rs. 12 lakh.
- FOIR (Fixed Obligation to Income Ratio)
It is calculated by dividing your net monthly salary by your fixed monthly expenses. This demonstrates how much money you possess (savings). Following that, the capacity of this disposable cash to cover debt payments is evaluated. The ideal FOIR proportion is between 40% and 50%, which means that your monthly expenses should not exceed 50% of your income.
The FOIR ratio should be as low as possible.
Maximum Amount that a Personal Loan Can Cover
While the amount varies by lender, you can typically obtain a loan of up to Rs. 20 to 30 lakhs if you are self-employed. Even so, some other variables may impact the loan amount.
Factors Influencing Personal Loan Eligibility
The following are significant factors to consider when deciding on a person’s trustworthiness:
- Income
One of the crucial risk elements before approving a personal loan application is the applicant’s monthly income. It would be perfect if you could earn at least Rs. 20,000 per month. Though income is not the only demand, earning more than Rs. 20,000 does not guarantee acceptance.
Lenders consider the amount they will have to pay for their financial duties when calculating the debt/income ratio.
- Employment Situation
Lenders consider the employment situation. They assess the standing of the company for which you work. If you work for the state or a large firm, you may be eligible for a loan with a higher loan amount. If you have been working with the company for more than a year, your chances are better.
- Age
The individual’s age is also very important. Borrowers must be between the ages of 22 and 58, depending on the lender, for loans to be agreed upon. Applying for a loan at or near retirement age can be difficult.
- Credit Rating
A credit agency, such as CIBIL, provides everyone with a three-digit credit score. This scale runs from 300 to 900. It increases your credibility in the eyes of the lender. When evaluating your credit score, your initial debt payments, bills, and card payments, among many other things, are taken into account.
If you’ve been paying all of your bills on time and have a good credit score, your chances of getting a new loan will increase. A score of at least 700 would be preferred.
What Personal Loan Amounts Are Available in India?
| Name | Loan Sum (Rs.) | Rate (per annum.) |
| Central Bank of India | Up to 20 lakh | 8.45% |
| Union Bank of India | Up to 15 lakh | 8.90% |
| UCO Bank | Up to 10 lakh | 8.45% |
| State Bank of India | Up to 20 lakh | 9.60% |
| IDBI Bank | 25,000-5 lakh | 9.50% |
| Citibank | Up to 30 lakh | 9.99% |
| HSBC | Up to 30 lakh | 9.75% |
| Federal Bank | Up to 25 lakh | 10.49% |
| Kotak Mahindra Bank | Up to 30 lakh | 10.50% |
| IndusInd Bank | 50,000 -15 lakh | 11.00% |
| ICICI Bank | 50,000 – 25 lakh | 10.50% |
| Axis Bank | Up to 15 lakh | 11.00% |
| HDFC Bank | Up to 25 lakh | 12.50% |
| Standard Chartered Bank | 1 lakh – 50 lakh | 11.00% |
Conclusion
After learning about the definition of a personal loan and your eligibility to get the maximum amount, you have all the required information.
Lenders will approve your application for a personal loan after considering your income, expenses, and credit score. The maximum bank loan amount you are eligible for is determined using either the multiplier method or the fixed debt-to-income ratio. A personal loan typically requires a minimum of Rs. 20,000 in net monthly income.
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