What is the Minimum Salary Required to Get a Personal Loan?

Planning a wedding, renovating your home, or dealing with an unexpected medical emergency, personal loans are your go-to solution. Instead of dipping into your savings or withdrawing your investments prematurely, a personal loan allows you to easily meet your immediate financial needs.

Table of Content

• What is the Minimum Salary for Personal Loans?
• Is Your Salary Sufficient for a Personal Loan?
• Meeting the Minimum Salary Requirement
• Beyond Salary: Other Requirements for a Personal Loan
• How to Increase Loan Approval Chances With a Low Income?

 However, to avail of a personal loan, you are required to meet certain eligibility requirements. One such key requirement lenders consider before approving a loan is your salary. This is because your income reflects your ability to repay a loan within the agreed repayment term. But what is the minimum salary required for a personal loan? Let’s find out:

What is the Minimum Salary for Personal Loans?

The minimum salary for a personal loan can vary depending on the lender and the amount you are borrowing. Generally, most financial institutions have a minimum salary threshold of around INR 20K to 25K to qualify for a personal loan.

However, it is important to remember that meeting the minimum salary loan eligibility does not guarantee loan approval. You will meet other requirements, such as a CIBIL score and employment stability, in conjunction with a minimum salary.

For self-employed individuals, the minimum income requirement is different. They must show the minimum turnover, which is a business’s gross annual revenue and not a salary.

Is Your Salary Sufficient for a Personal Loan?

To determine whether your salary is sufficient for a personal loan or not, follow these steps:

• Calculate your overall monthly income, including from additional sources.
• Know your total monthly expenses, including rent, bills, food, and other obligations.
• Now, subtract your expenses from the total income to calculate how much you can contribute towards loan repayments.
• Then, use an online loan calculator to estimate the monthly payments based on the loan amount and interest rate.

Suggested Read: HOW TO GET PERSONAL LOAN WITHOUT CIBIL AND INCOME PROOF

Meeting the Minimum Salary Requirement

If your monthly income falls short of meeting the personal loan minimum salary criteria, you can consider:

• Increasing your monthly income by doing some part-time and freelancing jobs
• Cutting down on not-so-important expenses, such as subscriptions, to contribute some more money towards repayments
• Asking a family member or friend to become a co-signer of the loan, if the lender allows it

Beyond Salary: Other Requirements for a Personal Loan

Besides having a minimum salary for a personal loan, there are some other requirements that you must meet, including:

• DTI Ratio: A debt-to-income (DTI) ratio helps lenders determine your financial stability and ability to manage debt. It is calculated by dividing your total monthly debt repayments by your monthly income. A DTI ratio lower than 40% is not considered ideal by lenders.
• Credit Score: A good credit score of above 750 reflects a strong repayment history and thus increases your chances of loan approval.
• Age: Young borrowers have better chances of getting approval on a personal loan. Usually, the age range for a salaried individual is 21-60 years, while for self-employed individuals, it is 25-65 years.
• Employer: If you work in a reputable company, you are more likely to get personal loan approval. While this is not universally applicable, working in a good company does serve as an asset, as it shows you have a strong background and can repay the loan.

Suggested Read: What Is the Eligibility and Requirement for a Personal Loan?

How to Increase Loan Approval Chances With a Low Income?

Here are some tips to improve your loan approval chances even with low income:

• Improve your credit score by making timely bill payments, maintaining a low credit utilisation ratio, and disputing any errors on your credit report.
• Consider providing collateral to mitigate the risk of default payment.
• Apply with a co-applicant with a higher salary or a strong credit profile. This can increase your chances of loan approval.
• Opt for a longer loan repayment tenure. This can lower monthly installments and improve the debt-to-income ratio.

In conclusion, understanding the minimum salary for a personal loan is crucial for applying for and availing of one. Knowing the salary requirement beforehand can also put you in a position to better negotiate the loan terms with the lender. Remember that each lender can have a different minimum salary threshold, making it crucial for you to compare different offers before making a decision.

At Muthoot Finance, we offer easy personal loans eligibility, competitive interest rates, and flexible terms, decided based on income, credit score, and other factors. To avail a personal loan or know more about it, visit your nearest Muthoot Finance branch.