Personal Loan Eligibility Factors
The Eligibility for Personal Loan is calculated in below two ways –
- Income Multiplier Method
- Fixed Obligation Income Ratio (FOIR).
The most simple method is the Multiplier method. Just multiply the salary what you take home to a number from 9-18, depending upon the company you work for and its stability, turnover etc. to get the Loan amount eligibility. Below is its formula:Loan Eligibility = (Your Net Salary) x (a number from 9 to 18)
Fixed Obligation Income Ration (FOIR)
Loan amount eligibility depends upon EMI or monthly installment in respect to the Net Salary. That is, the maximum EMI, existing obligation & credit card outstanding acceptable by most Banks and NBFCs is 50-75% of you monthly salary. If the EMI or existing obligations gets more than 75% of your salary, the Banks will give you less loan amount or will increase the tenure of the loan. All the obligations – to be and existing are taken into account before sanctioning of loan.
How To Improve Eligibility for Personal Loan
1. Pay off running loans where less number of EMIs are left early to increase loan amount eligibility.
2. Never default in paying EMI or any other obligations to increase credit history.
3. Transfer your existing loans to a lower rate to reduce existing EMI that would help you get a higher Fresh Loan.
4. Timely repayment of previous personal loans helps you negotiate with banks to get higher loan amount.