What is a personal loan? A personal loan is an unsecured loan which helps meet financial needs. There’s no collateral for personal loan. The lender offers flexible personal loan for emergency needs. Personal loans are called No Reason Loans as you can avail them without giving the reasons. You can get instant personal loan where disbursal is within 24 hours.
You pay less interest and low processing fees on cheap personal loans. Banks like SBI, HDFC Bank and ICICI Bank offer personal loans. NBFCs like Bajaj Finserv, Mahindra Finance, IIFL Finance and Tata Capital offer personal loans.
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See Also: Personal Loan in India
Personal loan tenure is 1-5 years. Shorter personal loan tenure means higher personal loan EMIs and vice versa. Opt for high personal loan EMIs so that personal loan is repaid quickly and interest outgo is less.
The amount of personal loan depends on income. Banks restrict personal loan EMIs to 40-50% of monthly income. Banks also consider existing loans serviced when sanctioning personal loan. Most lenders sanction minimum personal loan amount of Rs 30,000.
Many Banks and financial institutions offer personal loans to people with low salaries of Rs 12,000-15,000 a month. Personal loan interest rate ranges from 12-24% a year.
Public and Private Sector Banks like SBI, HDFC Bank and Axis Bank offer personal loan to people with minimum monthly income of Rs 15,000 and above. Maximum personal loan amount sanctioned may be Rs 10-20 Lakhs. Banks may ask for a higher salary of Rs 20,000 a month if you reside in a metro city. Banks sanction personal loans within 1-2 days.
If you have low income, make sure CIBIL score is 700 and above to get personal loan sanctioned. You can easily get personal loan of Rs 2 Lakhs with monthly income of Rs 15,000-Rs 20,000.
See Also: Personal Loan In Bangalore
You have Fixed Obligation Income Ratio or FOIR method to calculate personal loan eligibility. Personal Loan amounts are calculated on the basis of maximum EMI which you can service with net income after accounting for expenses like other EMIs and rent.
Bank calculates eligibility like fixed obligations (This is also the EMI for new loan), and it should not exceed 50% of net income. This percentage varies across banks and other lenders. High income borrowers may enjoy 60-65%.
Let’s say you have a take home salary of Rs 50,000 a month and need a personal loan. You have no other fixed obligations or loans to repay. You apply for personal loan at the bank which has maximum FOIR requirement of 50%. The bank will sanction personal loan, but maximum personal loan EMIs will be 0.5*50,000= 25,000.
Let’s say the bank charges 11% on personal loan for tenure of 5 years. This translates to personal loan amount of about Rs 12 Lakhs. You get personal loan of Rs 12 Lakhs.
Now, let’s say you are already repaying car loan EMIs of Rs 10,000. Your personal loan EMIs cannot exceed Rs 25,000 – Rs 10,000 = Rs 15,000. At the same interest rate of 11% a year and personal loan tenure of 5 years; you get personal loan amount of Rs 7 Lakhs.
See Also: Immediate Cash Loans in India
Let’s say you avail a personal loan of Rs 2 Lakhs. The interest rate is 12% and the tenure is 4 years. What is your personal loan EMIs?
Use IndianMoney Personal Loan Calculator to calculate personal loan EMIs. Just enter personal loan amount borrowed of Rs 2,00,000; annual interest of 12% and loan period of 4 years. The personal loan EMIs come to Rs 5,267.
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