I Need a Personal Loan! How Much Should I Be Earning?

Whether you are facing unexpected expenses such as medical emergencies, home repairs, or even a planned purchase such as a high-end smartphone, a personal loan can be a huge help.  However, for a successful personal loan application process, it is essential to understand the eligibility requirements set by the lender, one of which is your income level.

Lenders look at this factor to ensure a stable source of income and the ability to repay the loan on time. This is why they set a minimum income requirement, which varies depending on individual lender policies and whether the applicant is salaried or self-employed. 

While other factors such as your age and work experience are also considered, a higher income along with a strong credit score may lead to quicker approvals with favourable interest rates. 

By understanding the salary requirements for a personal loan for immediate funds, you can better prepare your application and improve your chances of approval.

Keep reading to learn more about the income requirements for a personal loan and other factors that you need to consider before applying for one.

Salary Required for Personal Loan Approval

As we mentioned earlier, the minimum income criteria differ from lender to lender. At SMFG India Credit, the salaried residents of Delhi or Mumbai need to earn a minimum monthly salary of INR 25,000 to be eligible for a personal loan. Residents of other Indian cities should be earning at least INR 20,000 per month. Additionally, applicants must also have a minimum work experience of 1 year and should have been employed at their current job for at least 6 months.

While it is important to focus on the income requirement, it is important to remember that more factors influence your personal loan eligibility such as existing debts or financial commitments, age, and so on. As a general rule, your EMI should not exceed 70% of your monthly income.

Now What About Self-Employed People? What ‘Income’ Requirements Do They Need to Meet for Getting a Personal Loan?

The income requirements for self-employed individuals to be eligible for a personal loan are not tied to traditional salary requirements due varying nature of their earnings. 

Instead of a salary, the income requirement is based on the annual turnover or yearly profit after taxes, which must exceed the minimum threshold. This threshold, in turn, varies according to the nature of the profession or the domain of the business. 

Additionally, at SMFG India Credit, a self-employed applicant must have a business that has been operational for at least 3 years. The EMI for the loan should not exceed 65% of the income. Similar to salaried applicants, existing liabilities and debts are taken into account along with income during the personal loan approval process.

If you’re wondering how to get a personal loan as a self-employed individual, it is best to check with the lending institution directly for their specific thresholds or requirements.

Other Requirements for a Personal Loan

Let’s take a closer look at the various factors lenders consider to assess your eligibility, beyond your income:

1. Age: Younger individuals may be favoured as they have more earning years ahead, while older individuals may demonstrate a more stable income source or credit history. Most lenders set age limits for borrowers, typically between 22 and 65 years.
2. Debt-to-Income (DTI) Ratio: This ratio is crucial for assessing your financial health. It compares your total monthly debt payments to your gross monthly income. A lower DTI ratio (ideally below 30%) indicates that you have a manageable level of debt, making you a more attractive candidate for a personal loan.
3. Credit Score: Applicants should ideally have a good credit history with a credit score of 750 or above. This signifies responsible borrowing behaviour and increases the chances of quick personal loan approvals at lower interest rates. 
4. Employment Stability: Lenders prefer applicants with stable employment. Salaried individuals should ideally have at least 1 year of work experience and 6 months in their current job. For self-employed individuals, having a business operational for at least 3 years is often required.
5. Nationality: Most lenders require the applicants to be residing citizens of the country.

Factors Influencing Minimum Salary Requirements

While minimum salary requirements are set as a standard for personal loan approval, several factors may influence them, especially when applying for a large loan: 

1. Relationship with the Lender: An existing relationship with the lender can influence the minimum salary requirements for a personal loan. Good past repayment behaviour may at times compensate for a lower income.
2. Place of Employment: Individuals employed in government sectors often have higher job security, making lenders more likely to favour them even if they have lower incomes. 
3. Location: The city of residence directly affects the cost of living, and lenders typically require applicants living in metropolitan cities like Delhi and Mumbai to have higher incomes.
4. Credit Score: A high credit score signifies responsible financial behaviour. Thus a good credit history may sometimes compensate for a lower income. 

However, it’s important to note that the specific factors, and the weight they carry during the decision-making process, can differ between lenders.

Conclusion

If you’re thinking, “I need a personal loan”, it is crucial to understand various factors that influence your eligibility, particularly your income. By being aware of the minimum lender requirements and considering other factors such as credit score and existing debts, you can prepare a strong application. If necessary, consider adding a trusted co-applicant with a strong credit score and a stable income source to improve your chances of approval. 

Meet the minimum income requirements and eligibility criteria prescribed by SMFG India Credit? Apply online today for a personal loan of up to INR 30 lakhs* at interest rates starting at just 13%* per annum.