In India, obtaining a loan can be a challenging task, especially for individuals with lower incomes. If you’re earning a salary of ₹35,000 per month and wondering if you can get a loan, the answer is yes, but with certain conditions. In this essay, we’ll explore the key factors to consider before applying for a loan with a ₹35,000 salary.
This article will explore the key factors that affect your loan eligibility and how you can prepare for the application process. Let’s dive in.
1. Credit Score: The First Thing Lenders Check
Your credit score, which typically ranges from 300 to 900, is one of the most significant factors in determining your eligibility for a loan. Lenders use it as an indicator of your creditworthiness or your ability to repay a loan based on your financial behaviour in the past.
For a loan to be approved with a salary of Rs 35,000, a credit score of 700 or above is generally preferred. If your credit score is on the lower side (say, below 650), getting approved for an instant personal loan might be challenging, or you might be offered higher interest rates to offset the risk the lender is taking.
2. Debt-to-Income Ratio (DTI)
A key metric in loan eligibility is your debt-to-income ratio, which measures how much of your monthly income goes toward repaying existing debts. Essentially, it’s a ratio of your total monthly debt payments to your monthly income.
Lenders prefer a DTI ratio below 40%. If you have a higher ratio, it may signal that you’re already overburdened with debt, making it harder to repay additional loans. For someone earning Rs 35,000 per month, your existing debt obligations should be low to maintain a favourable DTI ratio. If you don’t have any significant existing loans or credit card debt, your chances of getting approved for a loan increase significantly.
3. Job Stability and Employment Type
Lenders prefer applicants who are employed in stable jobs, preferably in a reputable company. Having a steady income source reassures lenders that you’ll be able to repay the loan without defaulting.
If you’ve been employed at the same company for more than 1-2 years, your job stability will work in your favour. Conversely, if you’re in a probationary period or have frequent job changes, it might raise concerns for lenders, especially when applying for higher amounts such as a 5-lakh personal loan.
4. The Type of Loan You’re Applying For
The type of loan you’re seeking has a direct impact on your eligibility. For example, a personal loan may have different eligibility criteria than a car or home loan. Since personal loans are typically unsecured (meaning they don’t require any collateral), lenders may be more cautious in approving them compared to loans with collateral.
When applying for a personal loan with a salary of Rs 35,000, it’s important to note that lenders usually consider your income level and existing financial obligations. While you might be eligible for smaller loan amounts, an inflated personal loan might be more difficult to get unless your credit score is high, your DTI ratio is low, and you have additional sources of income.
5. Down Payment or Collateral Requirements (If Any)
For loans such as home loans or auto loans, lenders often require a down payment or collateral. However, personal loans typically do not require any security, making them more accessible for individuals with a salary of Rs 35,000.
While a down payment might not be necessary for an instant personal loan, if you’re looking to borrow a higher amount, lenders may be more inclined to approve your loan application if you can offer some form of security or down payment.
6. Loan Amount and Tenure
The loan amount you wish to borrow plays a crucial role in determining whether you’ll be approved. When applying for a personal loan with a salary of Rs 35,000, it’s important to keep in mind that the loan amount should be in line with your income. Typically, lenders offer loans up to 10-20 times your monthly salary, depending on your creditworthiness.
For example, if you wish to apply for a Rs 5-lakh personal loan, you should be confident that you can manage the EMI comfortably within your budget. If your monthly salary is Rs 35,000, lenders might offer you a loan of around Rs 3 lakh to Rs 4 lakh. The EMI for a higher loan amount could exceed your repayment capacity, especially if you have other financial obligations.
7. Interest Rates and EMI Calculation
Before applying for any loan, it’s essential to understand how interest rates and loan tenure will affect your monthly EMI. While a longer tenure may reduce your EMI, it could also mean higher total interest paid over the life of the loan. Conversely, a shorter loan tenure increases your monthly EMI, but you’ll end up paying less interest overall.
It’s crucial to use tools like a personal loan eligibility calculator to determine the monthly EMI based on the loan amount, tenure, and interest rate. Many online calculators allow you to easily estimate how much you can borrow, the interest rate applicable, and the EMIs that fit within your budget.
Final Thoughts
Applying for a personal loan with a monthly salary of Rs 35,000 is certainly possible, but it requires careful consideration of your financial standing. Your credit score, debt-to-income ratio, job stability, and the type of loan you’re applying for are all critical factors that lenders will consider.
Remember, each lender has different criteria, so it’s always a good idea to compare offers from multiple banks and financial institutions before making a decision. Taking the time to do this will ensure you get the best possible loan terms for your financial needs.
