<h1>What is the Minimum Salary to Get a Personal Loan?</h1>
There was a time when getting a Personal Loan was a challenge, people had to wait in long queues to submit their application forms, let alone approvals. Today, things have changed. Digitisation has transformed “how people apply for loans?”. They can easily look for Personal Loan requirements online and apply. This credit product is excellent for people who need immediate cash for various reasons, including home renovation, wedding expenses, medical emergencies, etc. However, it's essential to meet the eligibility criteria the lending institution sets.
One of the most critical factors in determining eligibility for a Personal Loan is the minimum salary of an individual. Most lending institutions have an income requirement for loan applicants. Let's explore more about the minimum salary for Personal Loan in India.
Understanding Personal Loans
Before we jump straight into the salary requirements, let's take a quick glimpse into Personal Loans. A Personal Loan can be defined as a type of unsecured loan offered to borrowers by reputed financial institutions like Fullerton India. Unsecured credit products do not require collateral or security to avail of the loan. Personal Loans are popular among borrowers because they charge a fixed interest rate, have flexible repayment terms, and have a quick approval process. Moreover, Personal Loans are versatile and can be used for various purposes, such as debt consolidation, home renovation, education, etc.
Minimum income requirements for Personal Loans
Now that you know what Personal Loans are, let's dig into the salary requirements for a Personal Loan. If you are an employed individual, there's a minimum salary eligibility criteria. It's important to note that the minimum amount can vary based on the loan provider. The minimum salary required for a Personal Loan depends on other important factors like the lending institution's policy, the loan amount, the borrower's credit score, etc. Typically, lending institutions require a minimum monthly income of Rs. 20,000 to Rs. 25,000 to be eligible for a Personal Loan. Some lending institutions may have more stringent eligibility criteria, while others may be more lenient. Therefore, it is crucial to research various lending institutions and their policies to determine which lending institution offers the most suitable loan option for your financial needs.
Key factors in determining salary requirements
Here are some critical factors influencing how a financial institution determines minimum salary requirements.
1. Credit score
One of the critical factors that help determine minimum salary requirements for a Personal Loan is the borrower's credit score. A credit score is a three-digit number representing an individual's creditworthiness based on their credit history. A higher credit score can improve your chances of loan approval. It indicates that the borrower is more likely to repay the loan on time, making them more eligible for a Personal Loan.
2. Principal loan amount and location
The principal loan amount is the next crucial factor influencing the minimum salary requirement. If you apply for a higher loan amount, your EMIs will be more (keeping other factors constant) and vice versa. You can only repay a higher borrowed amount if you earn more. The requirement is also contingent on the borrower's location.
3. Debt-to-income ratio
The debt-to-income ratio indicates the borrower's monthly debt obligations as a percentage of their monthly income. For example, if you earn Rs. 50,000 monthly and pay around Rs. 25,000 as debt, the ratio will be 1:2 (50%). If the borrower's debt-to-income ratio is high, they have a significant amount of debt compared to their income, making it difficult to repay the loan. Therefore, lending institutions may require a higher minimum salary to ensure the borrower can repay the loan.