How Bank Decide the Amount of Personal Loan to the Customers?

Personal Loan is most popular financial product nowadays.  Many people prefer to get a personal loan to get financial help instead of asking for money from their friends and relatives. Personal loan provides you money at quite reasonable rates of interest. First of all bank checks your eligibility after that if you are eligible than bank gives you loan easily. Personal loan is easily accessible.

What is a Personal Loan?

Personal loan is an unsecured loan provided by the banking and non-banking financial organizations to the customers to fulfill their personal needs. A personal loan can be used for wedding purposes, for business purposes, for educational purposes, for paying medical bills, or any other personal need.

Eligibility

Before providing you a personal loan bank puts some checks on you. They check whether you are eligible to pay back the loan to the bank or not. After that if you are eligible then bank decides the amount of loan according to your income. Here some eligibility criteria are given

  1. First of all your age should be more than 21 years.
  2. After that if you’re salaried your salary should be more than Rs. 20000 at least.
  3. If you’re self-employed then you should be paying ITR of 2.5 Lakhs from at least last 3 years.
  4. Your credit history should be good. It means you should have a good credit score.

Amount of Loan

Amount of loan that bank provide is not same for everyone. It depends on your income.  Basically bank provides you loan according to your salary. However the method of deciding the amount of loan may vary slightly from bank to bank but still is quite similar. Let us discuss it for both salaried and self-employed persons.

  1. For Salaried Applicant

If you are salaried and you are applying for personal loan then bank will provide you amount maximum of 20 times of your monthly income. It means bank generally put a multiplier of 20 on your monthly salary. For example if your salary is Rs. 20,000 then he will get a loan of Rs. I0 Lakhs maximum.

  1. For Self-Employed Applicant

For self-employed applicants there is a criterion of multiplier of 4 on the ITR. For example if a person files an ITR of 3 Lakhs per year then he will get a loan amount of Rs. 12 Lakhs maximum.

So these are the basic ways adapted by the banks to give personal loans.