InvestorQ : How is the maximum loan amount decided in a personal loan?
vani Patil made post

How is the maximum loan amount decided in a personal loan?

priya Shah answered.
3 years ago

The maximum amount of loan that a borrower lends you is dependent on your employment status. It varies for a salaried individual and for a self-employed individual.

For a salaried individual

Banks or non-banking financial companies (NBFCs) sanction an amount to salaried individuals in such a manner that their equated monthly instalment doesn’t exceed 30-40% of the individual’s in-hand income.

Lenders also bear in mind the existing loans that an individual has, if any.

For self-employed individual

The loan amount for a self-employed individual is determined on the profit that is earned by the individual based on the latest profit/loss statement of the business.

Like for a salaried individual, banks and NBFCs also keep in mind other financial liabilities of a self-employed individual before sanctioning a loan. This is more so important in case of a businessman/businesswoman because they might have taken a loan for working capital purposes.