Maximum Amount of Money You Can Borrow With a Personal Loan: Factors and Guidelines

When considering a personal loan, one of the primary questions that come to mind is: How much money can I borrow? The maximum loan amount varies based on several factors, including credit score, income, and lender policies. In India, the typical range for personal loan amounts can be from INR 50,000 to INR 40,000,000. However, it is crucial to understand the underlying factors that determine this limit.

Factors Influencing Personal Loan Amounts

The amount you can receive from a personal loan depends on a variety of factors. Here's a detailed look at the different ways lenders assess and determine the loan amount.

Multiplication Method

One of the most commonly used methods involves multiplying your net monthly income by a factor. This factor can range from 9 to 18, depending on your credit history and the reputation of your employer. For instance, if your monthly salary is INR 50,000 and the basic multiplier is 18, your maximum personal loan limit would be INR 900,000.

However, it is important to note that the specific multiplier may vary based on your overall financial profile and the lender's policies. This method is a rough estimate and does not guarantee the exact loan amount you can receive. A lender will also consider additional factors to determine your eligibility for a personal loan.

Loan Repayment Capacity

Banks and non-banking financial companies (NBFCs) typically offer personal loans ranging from INR 10,000 to INR 40,000,000. Your eligibility primarily depends on your loan repayment capacity, which is a measure of your ability to repay the loan based on your income and expenses.

To be eligible for a personal loan, most banks require a minimum net monthly income. In India, the minimum requirement is often INR 20,000. In cities like Mumbai and Delhi, the minimum income limit may be higher, at INR 25,000. These limits reflect the lender's belief that borrowers with higher incomes have a better capacity to repay the loan.

Documentation and Eligibility Checks

When you apply for a personal loan, the lender will perform several checks to determine your eligibility:

Age Verification: You must be at least 21 years old at the time of application, and 60 years old or younger upon loan maturity. Net Monthly Income: A minimum net monthly income of INR 15,000 is required for a loan tenure of 12 to 60 months. Employment Verification: Salaried employees, those working in public sector undertakings, and salaried doctors are eligible to apply for a personal loan. Minimum and Maximum Loan Amounts: For eligible borrowers, the minimum loan amount is INR 50,000 and the maximum loan amount is INR 5,000,000.

During the application process, the lender will verify your age, documentation, and repayment capacity. They will use this information to decide whether to approve your loan request and determine the amount they are willing to lend.

For example, when I recently applied for a personal loan, the bank conducted a thorough assessment of my eligibility. They checked my age, income documentation, and repayment capacity. Based on this assessment, they approved my loan request and disbursed INR 2,000,000 to my bank account. This amount was sufficient to purchase my desired two-wheeler vehicle, allowing me to enjoy the freedom of the roads.

Responsible Borrowing

It is crucial to practice responsible borrowing when applying for a personal loan. Always take the loan amount that aligns with your financial situation and repayment capabilities. Over-borrowing can lead to financial stress and long-term consequences. Ensure that you have a clear plan to repay the loan within the agreed timeframe to avoid any negative impact on your credit score.

Understanding the factors that influence the maximum loan amount can help you make an informed decision when applying for a personal loan. Remember that each bank in India offers different financial products with varying terms and conditions, eligibility criteria, and for different income groups. Always research and compare the options available to you before making a decision.