Minimum Salary for Applying Personal Loan

At times, life throws up challenges or uncertainties when you might need more money than you have at hand. A quick and convenient collateral-free Personal Loan can be the solution you can use in such situations. However, lenders require borrowers to have a stable income and a good credit score for approving their Personal Loan applications. Read on to know the minimum income you should be earning for availing a Personal Loan.

Minimum Salary Required for Personal Loan Approval

First off, it is important to note is that it’s not just the salary that lenders look at while reviewing Personal Loan applications, there are other factors as well. An applicant’s cash flow and Debt-to-Income (DTI) ratio are also assessed before granting loan approval.

Banks and other financial institutions have Personal Loan eligibility criteria when it comes to the minimum income of the loan applicant. For example, ICICI Bank requires salaried applicants to earn a salary of at least ₹ 30,000 a month, although that changes depending on the applicant’s location. The applicant must also have minimum 2 years’ work experience with their current employer or overall in their professional career. Applicants also need to have been residing at their current residence for at least a year.

Remember, while these are the broadly mandated requirements for salaried applicants, the minimum salary required will also depend on the profile of the job, the type of employer and whether applicants have an existing relationship with ICICI Bank.

The natural next question would be- what about self-employed people? What income requirements do they need to meet for getting a Personal Loan? At ICICI Bank, self-employed Personal Loan applicants must show a ‘minimum turnover’ and not a salary. Turnover is a business’s gross annual revenue. Self-employed non-professionals must have a turnover of at least ₹ 40 lakh while self-employed professionals must be able to show a minimum turnover of ₹ 15 lakh as per their audited financials.

After meeting the minimum turnover requirement, self-employed applicants need to show they earn a minimum profit after tax. This is a minimum of ₹ 2 lakh for proprietorship firms and non-professionals and ₹ 1 lakh for self-employed professionals.

Self-employed applicants also need to have been in business / in practice for a specified minimum period of time. While doctors need to have been practising for at least 3 years, other self-employed individuals must have been in business / practice for a minimum of 5 years.

Other Requirements for a Personal Loan

Income is not the only criterion on which your application is reviewed. Other factors that contribute to the decision are:

1. DTI (Debt-to-Income) Ratio

The DTI Ratio is a crucial metric that combines all your debt and divides it by your monthly income. This is one of the first things lenders look at, as it helps them understand if the borrower is well-placed to repay the loan since this ratio includes debt, insurance payments and taxes. Banks use your DTI ratio when determining whether you can repay the loan. Any value above 40% is not ideal.

2. Age

Younger borrowers have a better chance of getting approval for a Personal Loan. Usually, 21-60 years is the broad range for salaried individuals and 25-65 years is the range for self-employed individuals to be eligible for a Personal Loan.

3. Credit Score

Your credit score significantly impacts your eligibility for a Personal Loan. If your credit score is above 750, you don't have anything to worry about, as you have a higher chance of getting a loan sanctioned.

4. Employer

If you work in a reputed organisation, you can get a Personal Loan easily, though this is not universally applicable. However, working in a reputed company does serve as an asset since it shows that you have strong backing and can repay the loan.

Instant Personal Loans

Personal Loans have become a popular solution and a lot of people look for a Personal Loan with no credit checks. Banks like ICICI Bank have made this possible by offering Instant Personal Loans to existing customers who have had a relationship with the Bank for a certain number of years or those who have honoured their previous loans. Such customers can get instant approval on their Personal Loan applications online, with minimal or no documentation.

Conclusion

Your monthly salary / income, credit profile, credit score, job stability, age and correct documentation all play a key role in your Personal Loan approval. If you meet these criteria, you have a higher chance of quick approval and getting better loan terms with a lower interest rate.

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