New Delhi. If there is a sudden need for money, the first thing that comes to mind is personal loan. Banks and NBFCs are most reluctant to give personal loan to any applicant. The reason for this is that personal loan is considered to be the most risky loan. Therefore, banks and NBFCs keep an eye on many things including age, credit score, employment, income before giving personal loan. The personal loan is passed only after evaluating all these. But, do you know what salary is required to take a personal loan?
Banks check so many things because a personal loan is not given against any asset, rather it is given entirely on the basis of your individual capacity. For example, how much is your income and what will be your recovery options in case of loan default. Although each bank decides the eligibility for personal loan on a different scale, but the earning figures are generally the same for all.
Why do banks measure so much?
Be it a bank or an NBFC, before giving a personal loan, they do so much measurement with the customers because before giving the money, they want to know whether the customer will be able to return the money or not. His EMI repayment capacity is sufficient to enable him to return the money. If the customer defaults, what options can the bank have to recover its money? Banks want to know whether they will be able to pay the personal loan EMI without any problem.
Why so much scrutiny on personal loans?
There is no collateral in a personal loan, due to which in case of default the bank has no other option to recover or secure the loan. Due to lack of collateral, the bank does not have the opportunity to recover its money by selling it. This is why it becomes necessary to assess the income eligibility, so that there is not too much risk regarding the loan. Anyway, because of the risk on this loan, its interest rate also remains higher than other loans.
Monthly income assessment is necessary
Before giving personal loan, banks look at the debt to income ratio very closely. They have to assess what is the monthly income of the customer, so that he can easily pay his EMI. This is the reason why banks always decide the eligibility for personal loan on the basis of monthly income. For example, if someone’s monthly income is Rs 50 thousand and he pays EMI of Rs 12,500, which means that 25 percent of the total income will go towards the loan. In such a situation, the debt to income ratio will be around 35 percent.
What role does DTI play?
Many banks demand high DTI ratio for giving personal loans which should be around 40 to 45 percent. If a customer does not have the eligibility, then the bank can ask him to bring a co-applicant or guarantor. Not only this, the bank can talk about reducing the loan amount or increasing its tenure, so that the EMI gets reduced and it can be easily repaid. This makes it clear how important a role a customer’s income and DTI ratio play in getting a loan. If someone’s income is high and DTI is low, then he will get a higher amount of personal loan.
How much income is required for personal loan?
- HDFC Bank: HDFC Bank has limited the salary eligibility for personal loan to just Rs 25 thousand. This bank offers loans at low interest to employees working in the private sector as well as government employees.
- Axis Bank: The second largest private bank Axis has also fixed the minimum salary for giving personal loans at Rs 25 thousand. However, if you are an employee of Axis Bank, you can take a personal loan even on a salary of just Rs 15,000.
- Kotak Bank: Kotak Bank has also fixed the minimum salary for personal loan at Rs 25,000, if someone has a salary account in this bank. If there is a salary account in any other bank then the minimum salary should be Rs 30 thousand. However, if he is an employee of Kotak Bank, he will get a personal loan only on his salary of Rs 20 thousand.
- State Bank of India : The country’s largest government bank SBI has also fixed the personal loan eligibility for government employees and military personnel at just Rs 20 thousand, while for corporate sector employees the minimum salary has been kept at Rs 25 thousand.
