Several banks have diverse ways of calculating the Personal Loan eligibility. In the case of salaried professionals, usually most of the banks would calculate eligibility to be 1-1.5 times of their annual income. Many aspects such as existing loan obligations, average bank balance, the track record ofcurrentor past loans, company profile and loan tenancy also play a vital part in deciding your eligibility for a Personal Loan.
In the case of self-employedprofessionals or business owners, eligibility mostly depends on the income, business continuity,and repayment history for past and existing loans, net profitfrom the business, cash credit /overdraft limit relished, a line of business, cash flow, and bank statement amongst other things. Usually the loan amount is limited at 1.25 to 4 times of cash revenueproduced less the present liabilities or a certain percentage of revenue less the existing liabilities.
It is not tough to understand how these calculations are reachedat. Here are some factors that bank consider to analyse your eligibility for ICICI Personal Loan or other Personal Loan options:
1) Instalment to Income Ratio
Banks know that your loan value must not go beyond your repayment capacity. This percentage is up to 40% of your monthly income. Using the Instalment to Income Ratio (IIR) method, banks can easilydecide how much loan amount can be lent to you.
For example if you earn Rs.50,000every month, then your IIR is Rs.16,500. That means your equated monthly instalment (EMI)should not be over Rs. 16,500.
2) FOIR- Fixed Obligations to Income Ratio
The Fixed Obligations to Income Ratio (FOIR)assists lenders in determining how much EMI the applicant can pay for the current loan after deduction the total EMIs of existing loan obligations (if any).
For example, if your income is Rs.75, 000every month, and you have a car loan running, for which you are paying an EMI of Rs.5000,your new Personal Loan’s EMI should be: 50% of your income minus Rs. 5,000
50% of Rs. 75,000 = Rs.37,500
Car Loan EMI = Rs.5000
Maximum EMI for fresh Personal Loan = Rs.37,500 – Rs. 5,000 = Rs. 32,500
3) Other Factors
Apart from the factors mentioned above, lenders will also consider below-mentioned factors to decide your Personal Loan eligibility:
- Your age: 21-65 years
- Monthly income: above Rs. 25,000
- Credit Score: 750 or above
How to Calculate Your Personal Loan Eligibility?
To calculate how much EMI you need to pay for your Personal Loan, you can use Online EMI Calculator.
Just enter the following details to get the result:
- Loan amount you want to apply for
- Interest rate for the loan
- Loan tenure (in months or years)
You want a Personal Loan of Rs. 5 Lakhs for the tenure of up to 5 years, and the interest rate is 11% p.a, you EMI would be Rs.10,871 based on our EMI Calculator’s calculation.
This way, you can easily calculate if your EMI is under the range of 50% of your monthly income or not.