How Much Should I Earn to Get a Personal Loan?

Every lender has a set of rules to determine if you are eligible for a Personal Loan or not. One main criterion to determine your Personal Loan Eligibility is your monthly take-home pay or income. So what should be your monthly salary to qualify for a Personal Loan? Let us find out. The monthly income requirement depends on the following factors:

Place of Residence

As you may be aware, the cost of living varies from city to city. However, it follows a pattern, and this helps lenders determine the minimum income to qualify for a Personal Loan. The cities are classified into three categories - Tier I, Tier II, and Tier III.

The Tier I cities (also known as metro cities) like Delhi, Mumbai, Chennai, and others, are well-developed and have all major facilities like good transportation services, entertainment options, educational institutions, better career opportunities, and so on. If you live in a Tier I city, your cost of living must be high. This is why these cities have the highest minimum income requirement for Personal Loans which is usually Rs. 25,000 in most cases.

Tier II cities like Kochi, Mangalore, and others, may not have all the facilities as Tier I cities but are still pretty well-developed. They may be the local commercial hubs. The cost of living here may not be as high as that in metros, but it is still higher when compared to lesser developed cities. The minimum income requirement in these cities is usually around Rs. 22,000.

Tier III are semi-urban cities whose development lies between that of a village and a Tier II city. Some examples are - Salem, Roorkee, Dehradun, and so on. The cost of living here is not so high as Tier I and Tier II cities. So the minimum income requirement for Personal Loans is usually around Rs. 18,000.

The main reason for this difference is that lenders want to make the loan available to the maximum number of people while also ensuring that the borrowers can repay the entire loan amount on time.

The incomes mentioned above are just an estimate and can vary from lender to lender.

 

Debt to Income Ratio (DTIR)

Personal Loans are unsecured loans. This is why lenders become extra cautious and check if you can repay the loan well within the stipulated time period. You may be earning well above the minimum income limit required for your city, but if you have other debts to pay, then there are chances you may not be able to repay the Personal Loan. 

Lenders use DTIR to figure out your repayment capacity. As a thumb rule, if your DTIR is less than 20%, it is considered extremely good, and if it is above 40%, it could lead to being the main reason for Personal Loan Rejection. 

Debt in this scenario is not just other loan obligations, but also includes taxes, Credit Card bills, insurance premiums, and other payments.   

 

Other Factors to Consider

The factors mentioned above are not the only things that impact your income requirement for Personal Loans. There a few other parameters too that are taken into consideration when scrutinising your Personal Loan application such as:

 

1. Age

The younger you are, the more capable you are of earning an income for an extended period, and therefore your chances of chances of repaying the loan are better. The minimum age required to secure a Personal Loan is 21 years. 

 

2. Job Continuity

You need to be employed for a minimum 2 years (varies from lender to lender) before you apply for a Personal Loan. This is to ensure that you have cleared your probation period and have become a permanent employee. 

 

3. Credit score

Your credit score is an indication of your creditworthiness. A low credit score will mean that you have previously defaulted on a loan and lenders are generally wary of giving loans to people with a low score. The minimum credit score required to obtain a Personal Loan is 750.

We hope that you have got the answer to your question through the above information. If your income level falls under the required criteria, you can apply for a Personal Loan online through MyMoneyMantra to fund all your financial needs.  

Also Read: How to Apply Online for an Instant Personal Loan?

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