How much will they lend me?
Now that you have decided to apply for a personal loan, the next question is how much loan am I eligible for? How much will they lend me based on my salary?
What are the Eligibility Criteria?
- You should be an Indian citizen.
- Must be at least 18 years old.
- Must be a salaried employee.
- Monthly salary must exceed a minimum of ₹18,000; salary slips from the past 3 months and bank statements as income proof will be required.
- Since Stashfin provides instant loans, you must have access to net banking with your salaried bank account.
- Have a good credit history.
Factors that affect your loan amount
You might wish that you get a specific amount to fulfill your requirement, the actual loan amount that will be sanctioned will depend on a multitude of factors namely: income, credit history, employment history, and stability.
Monthly Wage: The higher your income, the higher your scope of borrowing.
Employment Stability and Employer Reputation: The period of your employment and your employer’s reputation also plays a substantial role in determining your job stability. A steady employment status shows that you will have a dependable source of income in the coming years.
Credit History: How sensibly and cautiously you have serviced all your prior and current debts enhances your creditworthiness and reliability. This may secure you better deals in terms of lower interest rates when applying for a personal loan. Some lending companies also factor in whether you have simultaneously applied for loans from other lenders and whether you have defaulted in the past. Keep in mind that any existing EMIs you may currently have can reduce your eligibility – so pay your existing debts first before applying for any new loans!
Lifestyle: Lenders also take into account all your additional expenses, including what exceeds your “needs”. Your leisure or luxury expenses, if in profusion, can deter lenders from increasing the loan amount to be extended to you.
The exact loan amount you are authorized to borrow is at the lender’s discretion. However, most money-lending companies put a cap on personal loans at 25 lakhs per borrower. Money lenders often calculate the monthly revenue of loan applicants and the prospective growth in it before granting a loan.
FOIR (Fixed Obligation to Income Ratio)
Most financial institutes (money lenders) resort to something called FOIR before deciding on the loan amount. Generally, lenders will not approve loans if your FOIR exceeds 50-60%.
It is calculated as below:
FOIR = Sum of all monthly EMIs / Monthly income * 100
Let us compare the two scenarios below:
Raj earns a monthly income of ₹48,000 and pays the following monthly:
Home loan – ₹8,000, Credit card bills – ₹2,000
Raj’s FOIR is: 10,000 / 48,000 * 100 = 20.83%
Bala earns a monthly income of ₹48,000 and pays the following monthly:
Home loan – ₹20,000, Credit card bills – ₹5,000, Car loan – ₹6,000, Medical loan – ₹2,000
Bala’s FOIR is: 33,000 / 48,000 * 100 = 68.75%
Raj’s FOIR is 20.83 and it is more likely that his loan would be approved and the sanctioned amount will be higher
Bala’s FOIR is 68.75 and it is unlikely that his loan would be approved.
In conclusion, the amount of loan that gets sanctioned to you depends on your income, employment stability, a good credit score, credit history, and a low FOIR.