How Much Personal Loan Can You Really Get? Understanding Your Borrowing Power

When you need a personal loan, the amount you can borrow is a major concern. While your personal financial needs dictate how much you want to borrow, banks and lenders follow specific rules to decide how much they will lend. This guide will break down what influences the maximum personal loan amount you can get.

What's the Maximum Loan Amount Available?

The exact maximum loan amount varies from bank to bank. For instance, SBI and Kotak Mahindra Bank offer personal loans up to ₹35 lakh, while HDFC Bank and Axis Bank go up to ₹40 lakh. ICICI Bank can provide up to ₹50 lakh. Interestingly, IDFC First Bank stands out by offering personal loans up to ₹1 crore for eligible customers. Ultimately, the amount you can borrow depends on your income, the lender's policies, and your ability to keep your existing debts low.

What Determines Your Loan Size?

Banks primarily look at your Net Monthly Income (NMI) to decide your personal loan amount. NMI is your income after deducting any existing loan obligations (like other EMIs or credit card payments). Lenders also consider your credit score and your past record of repaying loans.

For example, if you earn ₹60,000 per month and pay ₹5,000 towards existing debts, your NMI is ₹55,000. Many lenders use a multiple of your NMI to calculate the eligible loan amount. SBI, for example, typically offers up to 24 times your NMI. So, with an NMI of ₹55,000, you might be eligible for a loan of ₹13.2 lakh (₹55,000 x 24). Generally, lenders offer personal loans ranging from 15 to 40 times your NMI. Axis Bank, for instance, offers 15 times the NMI.

The Importance of Net Income and Debt Levels

NMI, or Debt-to-Income (DTI) ratio, is a crucial factor. It’s calculated by dividing your total monthly debt payments by your monthly income. Lenders use this to understand your capacity to repay new loans. While there's no strict rule, a DTI of less than 40% is considered ideal by lenders. A lower DTI significantly improves your chances of loan approval and can even help you get lower interest rates, reducing your overall financial burden.

Personal loans are unsecured, meaning you don't need to put up any property as collateral. This makes lenders extra careful. They give a lot of importance to your income because it shows your ability to repay. They also look at your credit score, existing loans, and how stable your income is. People with higher net incomes and fewer existing debts are preferred and usually get higher loan amounts at better interest rates.

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Conclusion 

While personal loans offer quick access to funds, they come with higher interest rates, typically ranging from 10.3% to 24%, compared to secured loans. It’s vital to ensure your overall debt remains manageable relative to your income. As a rule of thumb, avoid taking a personal loan that is more than 25 times your net monthly income.

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