When there is an urgent need of funds people generally opt for personal loans as the processing time is less and no collateral is required to avail this loan. Also, the personal loan can be used for any purpose. There is no restriction on usage of the amount disbursed under a personal loan. But the concern is how much can you borrow on a personal loan. Since the requirement of all individuals is not same, therefore it is important to ascertain the value required and the amount the lender can grant.
As personal loan is an unsecured loan the bank lends the loan after evaluating the repayment capacity of the individual. This value is determined by the bank on the basis of your income and savings. So, your salary plays a vital role in deciding the loan amount you are eligible for. After referring to the information provided by you regarding the earning and expenses the bank calculates the eligible loan amount using the personal loan eligibility calculator.
Personal Loan Eligibility Calculator:
Eligibility calculator is a methodical way of calculating the loan amount an individual is eligible to receive. It is a systematic way of computing the amount a lender can disburse to the borrower based on his repayment capacity. The income of the customer, savings, rate of interest and tenure of the loan are taken into consideration while computing the eligible loan amount.
Let’s use an example to learn how is the eligibility amount decided by the banks and other lending institutions.
Illustration: The monthly income of an employee working in a reputed company is ₹ 80,000. He wants a personal loan for some reason. After meeting all his expenses he is able to save 50% of his income which is ₹ 40,000. He applied for the personal loan in a bank. The bank after verifying his net income will calculate the eligibility amount using the below mentioned formula:
Personal Loan Eligibility Amount = ₹ 1,00,000 x Savings/Per Lakh EMI
Per Lakh EMI for –
Tenure – 4 years
Interest Rate – 14.50% p.a.
EMI Amount = ₹ 2,758
So, the eligibility amount = 1,00,000 x Savings/EMI
= 1,00,000 x 40,000/2,758
= ₹ 14,50,327
Therefore, the candidate having a monthly income of ₹ 80,000 can avail a loan of up to ₹ 14.50 lacs.
But before calculating the eligibility amount the bank evaluates an individual’s performance and checks whether an applicant is suitable to avail the loan facility. This evaluation is done on the basis of certain parameters. These factors decide whether an individual is capable of getting a loan or not.
Factors Affecting the Loan Eligibility: The factors that affect the loan eligibility are:
- Monthly Income
- Monthly Expenses
- Any Other Loan
- Credit History
- Job Stability
- Relationship with the Bank
- Category of your Employer
Once your application has been logged in and you receive the approval letter it is important to determine the installment amount you will be paying each month in order to pay off the debt. This will help you set aside the funds out of your income and help in timely payment of the loan. You can calculate the EMI amount using the calculator.
Personal Loan EMI Calculator:
PL EMI calculator is an online device designed for making the calculation of EMI easy. EMI stands for Equated Monthly Installment. It is the convenient monthly amount that the borrower has to pay to settle the loan availed.
The EMI consists of both principal and interest amount. This amount can be computed using the EMI calculator. It’s working is very simple. The user just needs to enter the loan amount, tenure and the personal loan interest rates. It will automatically calculate the result. And will reveal the total interest amount charged on the loan. This will help you know the installment amount you have to pay each month and the total repayment amount you will be paying by the end of the tenure.
Values you need to enter in the calculator-
- Loan amount
- Rate of Interest
Output displayed after calculating-
- Equated Monthly Installment (EMI) Amount
- Total interest amount
- Total repayment amount
Using the calculator you can even compare the various loan offers provided by different lenders and select the lender that provides best deals at reasonable rates.