How Much Personal Loan Can I Get On My Family’s Gross Income?
Personal loans are a good option for many people. But, how much you can borrow depends on how much money your family makes in a year. A personal loan is a short-term loan that is used to pay for expenses that come up suddenly.
If you need a lot of money but don’t have proof of income, your spouse might be able to help. If you only apply under your own name, you can’t add or replace your own income with your spouse’s. But if your spouse agrees to be a “co-borrower” on a loan, you can tell the lender how much money they make.
What is a Personal Loan?
A personal loan is a type of credit that lets you borrow money from a bank or other financial institution. The lender will give you the money based on your needs and how you plan to pay it back. This facility can be used for anything, like buying a car or house, paying off debts, investing in stocks and bonds, etc.
Different Types of Personal Loans
- Unsecured Personal Loan
Personal loans that don’t require collateral are the most common. An unsecured personal loan gives you a lump sum, which you pay back in EMIs.
- Secured Personal Loan
A higher loan amount usually means that you will need to put up something as collateral. You might be able to use something besides money as collateral. If you don’t pay on time, the lender might be able to take those assets you provided as collateral. These assets may comprise a piece of property including land, home etc. Besides, other items of financial value may also be used as collateral.
Specialized lenders: Certain kinds of lenders can also offer personal loans. Such loans are usually of a small amount. Although easy to acquire, these loans are unsecured and are fraught with risks of interest variability.
Using The Income of Your Spouse
Your partner can be a co-borrower on the loan if they have good credit and a stable income. Co-borrowers can improve your approval chances and offer more favourable terms and interest rates.
What is a Co-Borrower?
Co-borrower is a person who applies for a loan with another borrower and shares the risk. In these instances, both borrowers are responsible for repayment. They typically share ownership of the property or other collateral used to secure the loan. A co-borrower can help you present a higher total income than you can on your own. This arrangement is advantageous for those who share assets or finances.
In case your spouse agrees to be a co-borrower, your income and credit history will be considered. This will boost your likelihood of approval and make you eligible for a larger loan. It may also provide reduced interest rates, terms, or both. Late or missed payments could negatively impact both of your credit scores.
Eligibility Criteria for a Personal Loan
The eligibility criterion for taking a personal loan depends on the following factors:
- Applicant’s Age: A person should be between the ages of 22 and 58.
- Applicant’s Income: An income of at least Rs. 20,000 per month is required.
- Work Experience: One year of work experience is required.
Importance of The CIBIL Score for Personal Loans
The three-digit CIBIL score is a summary of your credit history, credit report, and credit rating. It is a key sign of how good your credit is. This number can be anywhere from 300 to 900, and it shows how likely you are to pay back a loan on time.
Minimum CIBIL Score Required For a Personal Loan: The CIBIL score is a way to rate how good your credit is. Different lenders have different minimum credit scores for personal loans. Most lenders think you have good credit if you have a credit score of 670 or higher.
Documents Required for a Personal Loan
The documents required to get a personal loan are as follows:
- Identity Proof: This includes a passport-size photograph and PAN card showing you as the borrower.
- Address Proof: This can be in the form of an electricity bill, gas bill, property tax receipt, etc.
- Income Proof: You may have to furnish your bank statement or credit card statement with monthly income details from the last three months or four years’ total income details (from all sources such as salary/income from self-employment).
The lender’s rigorous inquiry could have an impact on your credit score. Depending on the complexity of your application, your personal loans could be authorized between one to 10 business days.
Different Methods to Compute a Personal Loan Amount
- Multiplier Method
Financial institutions and banks use this method to decide who can get a personal loan. When the company pays its employees more and has a better reputation, the multiplier goes up. This means that you have a better chance of getting a loan with a lower interest rate and a bigger loan amount.
Here is an example of the personal loan amount Shanaya could get with a salary of Rs. 30,000. If she doesn’t have any other EMIs, she can multiply her monthly income by 27 to get the maximum loan amount. So, she would be eligible for a loan amount of Rs 8,10,000. The amount to be repaid shall depend on the prevailing interest rates offered by the financial institution.
- FOIR Method
FOIR is an abbreviation for Fixed Obligations To Income Ratio. This method lets the lender check your repayment capacity. It makes an assessment of your already existing EMIs and other financial obligations that you fulfil on a monthly basis. Those monthly deductions are subtracted from your income, and your FOIR is calculated.
The formula for the same is given as under:
FOIR = [All the monthly financial obligations/Monthly Salary] x 100
The evaluation of FOIR gives lenders an idea about the new EMIs to be set up for future loans. If the EMI exceeds the financial capability of the person, then the loan is rejected. Otherwise, it is acceptable.
What is The Maximum Personal Loan Amount You Can Get Based On Your Income?
The table given below gives a tentative loan amount for which you are eligible corresponding to the different income slabs.
| Salary | Loan Amount Expected |
| Rs. 20,000 | Rs. 5.40 Lakhs |
| Rs. 30,000 | Rs. 8.10 Lakhs |
| Rs. 40,000 | Rs. 10.80 Lakhs |
| Rs. 50,000 | Rs. 13.50 Lakhs |
| Rs. 60,000 | Rs. 16.20 Lakhs |
Conclusion
Personal loans are a great way to get finances under control. They also come with many perks. Borrowers can apply without worrying about how much their score has dropped over time or if they have any other issues with their finances. If you are applying for a loan, it is important to carefully evaluate your requirements.
If you’re looking for a personal loan in India, check out related blogs on Piramal Finance for more information.