Personal Loan

What is the Eligibility for a Personal Loan, and how is it Calculated?


People use personal loans to fulfil short-term financial needs. They include sudden medical expenses, weddings, vacations, furniture purchases, or car repairs. In some cases, people use it for daily expenses. Generally, a personal loan should be repaid within 2-3 years. It has a higher interest rate than other loans such as education, home loans, etc. The eligibility criteria for personal loans differ from other types of loans and depend on the lender’s discretion. Read on to learn about the eligibility criteria for a personal loan and how it is calculated.

How Much Personal  Loan Can I Borrow in India?

Getting a personal loan in India is a good idea if you know the process and eligibility. These key factors will help you arrive at an estimate of how much you can borrow. A Personal Loan amount approval typically ranges from 15-20% of your annual income. It includes your monthly income, expenses, debt obligations, and savings. The limit can be doubled in salaried individuals who have no other obligations (especially with a large retirement account). Bankers evaluate your creditworthiness to see how much they can lend.

What is the Eligibility for Personal Loan in India?

For personal loans in India, one needs to submit many documents to be submitted and adhere to strict guidelines. Some factors to qualify for a personal loan are:

  • Credit Score: A good credit score affects your application for a personal loan in India. A credit score in the range of 700-740 is seen as a good one. Check Personal Loan Eligibility Criteria of Top Banks/NBFCs online for more details.
  • Monthly Income: Most lenders require professionals to earn at least 60% of their annual salary through their salary. Lenders prefer those with a salary of at least Rs 15,000 perWhat is the Eligibility for Personal Loan in India? month. Most lenders need self-employed individuals to earn more than Rs. 2 lakh as gross annual income. Some lenders do not publicly declare their minimum salary or monthly income criteria for offering personal loans.
  • Age Requirements for Personal Loans in India: To qualify for a personal loan, you must be at least 18 years of age and have an active bank account in India. Most lenders require people to be at least 21 years old to qualify for unsecured credit cards. So, you are unlikely to get financing loan benefits before 21. You need identity proofs, such as Aadhar, PAN, etc. Please include a photo of yourself.
  • No Pending EMIS to Get a Personal Loan: To check if you qualify for a personal loan and how much it can cost you, you must know your eligibility and how much interest might be charged. Personal loans don’t consider existing debts. So, any pending EMI or medical payments and credit card bills are not seen as part of the net monthly income. So, you may find that lending institutions do not want to accept your application if you already have numerous outstanding loans being repaid over time.
  • Employment Status: A key criterion to get a loan is your employment status. It includes factors such as:
    • The reputation of the company you work in: Banks tend to prefer borrowers who work in major corporations or government organizations.
    • Total work experience in the company: A loan is more likely to be approved if the organization has employed you for at least one year. A minimum of 2 years in your company is also a benefit for company owners.
  • Personal Loan Offers depend on the Relationship with the Lender

If your relationship with your lender does not reflect well upon you, it could change the terms of your loan offer. For instance, lenders might grant a higher interest rate or provide a shorter loan period if they don’t know you well. In contrast, you may get competitive rates from lenders who know and work with you. So, find out how every lender assesses interest rates, and choose well. Consider your credit score, current debt, and income before you sign a contract.

How is Personal Loan Eligibility Calculated in India?

If you apply for a personal loan, you should use the Lender’s PL calculator. Lenders may use a couple of methods to determine if borrowers meet all the criteria given.

  • Debt-to-Income Ratio: The debt-to-income ratio should not exceed 50%. It is calculated by multiplying your monthly EMI payments by your monthly earnings.
  • Monthly Income Method: It is common for lenders to check a borrower’s eligibility based on the net monthly income of the borrower. An income of 25,000 per month would qualify you for a loan of about seven lakhs.
  • Multiplier Method: A simple formula is used in this method.
  • Loan Eligibility = (Your Salary) x (a number from 9 to 18)
  • Banks provide an x% interest rate based on your credit profile, where x ranges from 9 to 18.
  • FOIR (Fixed Obligation to Income Ratio): Using this method, banks figure out how much you earn in a month. They see how much you make in fixed payments per month or even per day and then subtract this figure from your total monthly income.

The formula for calculating FOIR is:

FOIR = (Sum of Existing Obligations/Net Take Home Monthly Salary) * 100

Refer to PersonalLoan ( for an in-depth offer for personal loans.

What Are the Interest Rates on Personal Loans in India?

Interest rates on personal loans in India usually have a fixed interest rate. So, you won’t have to pay an elevated interest rate if you only borrow money for a year. The interest rates on these loans can be anywhere from 12% to 24%, with shorter-term loans with low-interest rates. At the moment, the current Central Bank Lending Rate is 10%. Many factors affect the cost of borrowing money, such as:

The size of the principal amount you borrow;

Whether you repay your Loan over one or three years;

And whether you repay it in whole or make partial payments during that period.

There may be an add-on cost or a processing fee if you borrow more than ₹25 lakhs.


The eligibility for a personal loan depends on factors such as income, employment status, credit history, debt-to-income ratio, etc. The lending company evaluates these factors to check if you are eligible for a certain amount. For more clarity about personal loan eligibility and the different criteria for calculation, visit