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How do Banks/NBFCs Calculate the Maximum Eligible Loan Amount
Banks and NBFCs usually use Multiplier Method and EMI/NMI Ratio or a combination of these two methods to calculate an applicant’s personal loan amount eligibility. Under the multiplier method, the personal loan amount is calculated based on a predetermined multiple of the applicant’s net monthly income.
This multiple can be anywhere between 10 to 24 times of the applicant’s monthly income. EMI/NMI ratio, on the other hand, is the proportion of your net monthly income (NMI) spent on servicing your existing EMIs as well as the EMI of the new loan. Lenders usually prefer sanctioning personal loans to applicants having EMI/NMI ratio of up to 50-55%.
What are the eligibility criteria for availing a personal loan?
Lenders evaluate an applicant’s personal loan eligibility primarily on the basis of his income and loan repayment capacity. Other parameters that lenders factor in when assessing their applicants’ loan applications includes the applicant’s credit score, age, occupation profile, job/business stability and employer’s profile. The personal loan eligibility criteria usually set by most lenders for their salaried and self-employed applicants are as below:
Personal Loan Eligibility Criteria for Salaried and Self-employed Applicants
| Particulars | For Salaried | For Self-employed |
| Age Limit | 18 – 60 years | 21 – 65 years |
| Minimum Income (may vary across lenders) | Rs. 15,000 per month | Rs. 15 lakh p.a. |
| Minimum Work Exp./ Business Continuity | Usually 1 year with some lenders requiring longer work experience. | Usually 3 years of business continuity with some lenders requiring longer period of business continuity |
| Credit Score | Preferably 700 and above | |
Personal Loan Eligibility Criteria of Top Banks & NBFCs
The table lists the eligible loan amount, income and age set by some of the top banks and NBFCs:
| Lenders | Eligible Loan Amount | Minimum Eligible Income | Eligible Age |
| Axis Bank | Rs 50,000 – Rs 40 Lakh | Rs. 15,000 per month | 21-60 years |
| SMFG India Credit Company Limited (formerly known as Fullerton India Credit Company Limited) | Up to Rs 30 Lakh | Rs. 20,000 per month | – |
| HDFC Bank | Up to Rs 40 Lakh | Rs. 25,000 per month | 21-60 years |
| ICICI Bank | Up to Rs 50 Lakh | Rs. 30,000 per month | 23-65 years |
| IDFC First Bank | Up to Rs 10 Lakh | Rs. 25,000 per month | 23-60 years |
| IndusInd Bank | Up to Rs 50 Lakh | Rs. 25,000 per month | 21-65 years |
| Kotak Mahindra Bank | Up to Rs 40 Lakh | Rs. 25,000 per month | 21-60 years |
| Money View | Rs 5,000 – Rs 10 Lakh | Rs. 13,500 per month | 21-57 years |
| PaySense | Rs 5,000 to Rs 5 Lakh | Rs. 12,000 per month | 21-60 years |
| Punjab National Bank | Up to Rs 20 Lakh | – | Above 18 years |
| State Bank of India | Up to Rs. 30 Lakh | Rs. 15,000 per month | 21-76 years |
| Tata Capital | Up to Rs. 50 Lakh | Rs. 15,000 per month | 16-65 years |
| YES Bank | Rs 1 Lakh – Rs 40 Lakh | Rs. 25,000 per month | 21-60 years |
Note: Data updated as of 22 November 2024
Also Read: Which banks & NBFCs offer personal loans at low interest rates?
Factors Affecting Personal Loan Eligibility
Several factors influence an applicant’s eligibility for a personal loan. Understanding these factors might help personal loan applicants in improving their chances of securing a personal loan. Let’s take a look at the parameters that lenders use to assess their applicants’ personal loan eligibility:
- Credit score: Applicants with credit scores of 700 and above are considered to be more financially disciplined and hence, are less likely to default. Hence, banks and NBFCs prefer to lend personal loans to such applicants. Many lenders also set lower interest rates for personal loan applicants having higher credit scores. However, some lenders also offer personal loans to applicants having lower credit scores but at higher interest rates. Therefore, applicants should check their credit scores at regular intervals and take necessary steps to keep it as close to 900 as possible.
Prospective personal loan borrowers having no or low credit scores can improve their credit scores by availing lifetime free Step UP Credit Card, which is a secured credit card issued by SBM Bank (India) Ltd. with Paisabazaar as co-branded partner. To know how Step UP Credit Card can help in building or improving credit score, click here.
Note that the minimum credit score required for availing a personal loan may vary from one lender to another. Some lenders also offer personal loans to those who are new to credit i.e. applicants having no credit score.
- Employment Type and Employer Reputation: Among salaried and self-employed applicants, lenders offer personal loans to salaried applicants at lower interest rates due to their higher income certainty. Among the salaried applicants, government employees are the most preferred followed by the reputed corporates and MNCs. In case of personal loans offered to self-employed applicants, professionals like CAs, doctors, architects, etc. are more likely to get loan at lower interest rates.
- Age: Most banks and NBFCs offer personal loans to applicants in the age group of 18 years to 65 years. Various public sector banks also offer personal loans to pensioners on the basis of their pension income.
- Minimum Income: Higher income indicates higher capacity to repay your loan on time, which further implies lower risk for lenders. For salaried professionals, the minimum salary requirement set by most lenders is Rs. 15,000 or above. Note that individuals with a minimum salary of Rs 25,000 are preferred by lenders. In case of self-employed individuals, lenders usually require gross annual income of Rs. 2 lakh or more. Note that some lenders have not publicly disclosed the minimum salary or monthly income (in case of self-employed professionals/non-professionals) requirements for their personal loan applicants.
- Work/Business Experience: Many lenders specify that salaried individuals need to have a minimum total work experience of 1 year, with others requiring longer work experience to be eligible for availing personal loans. Some lenders may also require their personal loan applicants to have worked for a pre-determined period in their current organisations to be eligible for the loan. In the case of self-employed individuals and professionals, they usually need to have been in the current business for a minimum of 3 years in order to be eligible for an unsecured personal loan.
- Repayment Capacity: Banks and NBFCs usually sanction personal loans to applicants whose EMI/NMI ratio is not more than 50% to 55%, which may vary across lenders. This implies that their total credit card and existing loan EMI obligations, including that of the proposed loan, should not exceed 50% of their total income.
Before applying for a personal loan, use Paisabazaar Personal loan EMI calculator to find your optimum EMIs based on your repayment capacity while ensuring your total EMI obligations, including that of the proposed loan, does not exceed 50% of your monthly income.
Tips to Improve Personal Loan Eligibility
While there are multiple factors that you need to consider when determining your eligibility for a personal loan, there are only a few ways to improve your chances of being approved for a loan. The following are some tips to enhance your eligibility for a personal loan:
- Maintain a high credit score of 700 and above: Having a credit score of 700 and above increases your chances of getting loan approval that too at lower interest rates. A higher credit score also increases your access to instant personal loan offers from lenders with whom you have an existing deposit/loan account or credit cards. Repaying your credit card bills and loan EMIs in full by their due dates, avoiding making multiple loan/credit card applications within a short span, etc. can help you steadily improve your credit score.
- Add a co-applicant: Adding a close family member, such as spouse, parents, children, etc., to your personal loan application can also help in improving your eligibility for a personal loan. At present, not all banks and NBFCs allow co-borrowers in case of personal loans. However, having a co-borrower, if possible, can definitely improve your personal loan eligibility and thus, your chances of availing personal loan as in such cases, lenders consider credit scores and repayment capacity of both the applicants.
- Avoid frequent job changes: Lenders also consider an applicant’s employment history and stability when evaluating their personal loan eligibility. Lenders may hesitate giving out personal loans to applicants who as a practice change their jobs frequently. Such practice reflects career instability, which increases the credit risk for the lenders. Therefore, applicants must try to avoid job hopping, especially when they are planning to take a personal loan in the near future.
- Avoid multiple loan applications: On receiving your personal loan application, lenders fetch your credit report from credit bureaus to evaluate your creditworthiness. Such lender initiated credit report requests are known as hard enquiries. These hard enquiries reflect in your credit report, thereby reducing your credit score by a few points. Moreover, making multiple credit enquiries within a short span of time can show you as a ‘credit hungry’ borrower, which may lead to loan rejections by some lenders. Therefore, instead of directly submitting loan applications to multiple lenders, visit online financial marketplaces like Paisabazaar to choose the optimum personal loan offer from multiple loan options. Credit report requests generated through online financial marketplaces are considered as soft enquiries and they do not affect your credit score.
How much personal loan can I get based on my salary?
Lenders usually use the Multiplier Method and EMI/NMI Ratio or a combination of these two methods to calculate your personal loan amount eligibility. Under the Multiplier Method, lenders calculate personal loan amount on the basis of a predetermined multiple (ranging anywhere between 10 to 24 times) of the applicant’s net monthly income.
EMI/NMI ratio, on the other hand, is the proportion of your net monthly income (NMI) spent on servicing your existing EMIs as well as the EMI of the new loan. Lenders usually prefer sanctioning personal loans to applicants having EMI/NMI ratio of up to 50-55%.
The aforementioned methods of personal loan amount calculation can be time-consuming and tedious for many; therefore many lenders offer online personal loan eligibility calculators to help prospective borrowers know their eligible personal loan amount in no time with ease.
These online personal loan eligibility calculators give results in less than a second on the basis of a few basic details such as their monthly income, loan tenure, personal loan interest rate and existing EMIs (if any).
FAQs on Personal Loan Eligibility
What is the minimum salary required to apply for a personal loan?
The minimum salary requirement set by most lenders for their salaried personal loan applicants is Rs. 15,000. However, some lenders may set higher minimum salary requirement for their personal loan applicants.
What is the maximum age limit to apply for a personal loan?
Most lenders specify the age limit for availing personal loan at between 18 years and 60 years (for salaried applicants) and 18 to 65 years (for self-employed applicants). However, some lenders require their salaried personal loan borrowers to complete their personal loan repayment by the time they complete 60 years of age.
How to increase your eligibility for a personal loan?
Those planning to avail personal loans can improve the chances of their loan approval by following these tips:
- Keep your CIBIL score above 700
- Review your credit report for any inaccuracies as they may adversely impact your credit score and reduce your chances of getting approval on the loan
- Compare personal loan offers of various banks/ NBFCs before making the final loan application
- Don’t make direct loan application with multiple lenders
Can I apply for a personal loan online with a low salary?
Yes, even if you have a low salary you may be able to apply for a personal loan. This is because not all lender specifies a minimum salary to be eligible for a personal loan. However, the loan amount sanctioned will typically be below and you may also be charged a high rate of interest.
Click to know which banks and NBFCs have low salary requirements.
What is the minimum salary to be eligible for an SBI personal loan?
Currently, the minimum salary to be eligible for an SBI personal loan is Rs. 15,000. However, meeting the minimum salary criteria does not guarantee that your loan application will be approved.
What are the eligibility requirements for availing Rs. 20 lakh personal loan?
The eligibility requirement for availing a Rs 20 lakh personal loan would be the same as that for any other loan amount such as the applicant’s age, credit score, income, loan repayment capacity, occupation profile, employer’s profile, etc. However, these requirements may vary from one lender to another lender.