What Should Be The Minimum Salary Or Income For Personal Loan?

Do you have unplanned emergencies? To meet your immediate financial needs, a personal loan is an excellent option. Personal loans are short-term loans provided by banks and financial institutions. They can be used to meet various expenses like weddings, home renovations, travel, and so on.

In India, personal loans can be obtained without any collateral. These loans are credited directly to your bank account at a predetermined interest rate. The loan must be repaid in instalments over the course of the loan’s term.

Processing personal loans is usually hassle-free and completely paperless. Hence, they are easier to avail of compared to other loans and financial instruments. Plus, the amount can be used for various financial requirements, making it highly flexible.

Are you unsure whether you can get a personal loan? To help answer your questions, let us look at the factors that determine your personal loan eligibility. 

Factors that Determine Eligibility for a Personal Loan

Personal income and other factors that determine your personal loan eligibility:

• Income: Income is the first factor that determines your personal loan eligibility. In the case of salaried professionals, this will be a straightforward process, while self-employed individuals usually have to show proof of income to avail of a personal loan.  
• Credit Score: The credit score is the most important factor other than your salary, that plays a huge part in personal loan approval. A credit score is a way for banks and financial institutions to determine how creditworthy a particular individual is, and it is based on several factors like credit history, economic behaviour, and other aspects. Generally, the higher your credit score, the larger the loan amount and lower the interest rate you will be charged. 
• Age: The basic age requirement for most personal loan applications is between 18 and 65 years. While personal loans to pensioners are available, they may not qualify for income-based personal loans.  
• Employment Type: In addition to income, the lender will also determine the individual’s creditworthiness based on the type of establishment they work at. Corporate companies, or MNCs, are usually preferred and improve the chances of getting personal loan approval.  
• Work and business experience: Another factor that plays a role is the type of work, position, or business that the person works in. Salaried individuals in managerial or upper management positions have a much better chance of obtaining a loan. Meanwhile, individuals working in government companies or professions like CAs, architects, doctors, and others get loans at lower interest rates.  
• Location: Where you live also determines whether you can obtain a personal loan. Usually, those living in metro cities like Mumbai, Bengaluru, Chennai, Hyderabad, Delhi, Pune, and others can avail of loans easier than those living in Tier-2 cities or towns. 

Who is Eligible for a Personal Loan?

The basic criteria for personal loan eligibility are as follows:

• The individual must be an Indian citizen with an age between 21 and 60 years.
• The person should be self-employed or salaried with a minimum monthly income of Rs. 25,000 per month (for metro cities) or Rs. 20,000 (for tier-2 cities and towns).
• The applicant has to have at least 1–2 years of experience.
• Their minimum CIBIL score (credit score) has to be 750 or above. 

How to apply for a personal loan?

The application for a personal loan can be made by visiting your lender or entirely online, most of which may not even require documentation if you are already associated with the financial institution.

To apply for a personal loan, you need to follow these steps:

• Select the lender that you want to get the loan from.
• Select the personal loan that applies to you depending on your eligibility.
• Produce documents that are required by the lender (these could be proof of residency and identity like an Aadhaar card, PAN card, driving license, passport, water bills, electricity bills, or others), proof of income (salary slips, income tax returns of the last three years, or other documents), and a photograph of the applicant.
• Once the documents and application form are filled out, you can submit them at the nearest financial institution or bank branch. Alternatively, you can submit the entire set of details online by logging in to your lender’s website and filling out the required details.

Once the documents and application are submitted, the financial institution will do some basic checks. If all the criteria are met, your loan amount will be disbursed swiftly into your bank account. However, if the personal loan application is rejected, do not lose hope, as you can always apply for a new loan or opt for another lender that matches your requirements. 

To summarise

To ensure that your chances of getting a personal loan are high, you must have a good credit score, and not have too many existing loans. This can hamper your chances of getting approval for the loan. 

If in doubt, consider consulting an institution like Piramal Finance. They have a free personal loan calculator that can help you calculate how much you can borrow depending on your income and credit score.