InvestorQ : How much personal loan do I qualify for ?
Dharnidher Dubey made post

How much personal loan do I qualify for ?

Sadaf Khan answered.
2 years ago
Personal loan eligibility can be calculated in two ways:
  • Multiplier Method
  • FOIR (Fixed Obligation to Income Ratio)

Multiplier Method – Under this method, banks apply a multiplier to your net take home salary to calculate your loan amount eligibility. The multiplier applied is a function of your take home salary and company profile. Higher the salary and more reputed the company, higher is the multiplier and your loan eligibility. Generally, banks apply a multiplier of 9 to 22 and these multipliers are defined for different levels of salary and internal categorization of companies by the bank. Higher the category to which a company belongs, higher will be the loan amount eligibility and lower the personal loan rate of interest.FOIR (Fixed Obligation Income Ratio) – Under this method, your loan amount eligibility is calculated on the basis of maximum EMI or monthly installments you can service with respect to net income after accounting for other fixed expenses such as rent and EMIs. Banks or NBFCs generally accept 50 – 75% of your net income as EMI, existing fixed obligations and credit card outstanding. If the obligations exceed bank’s norms, then bank will either reduce your loan amount or will increase the tenure of your loan.

The bank calculates your eligibility such that fixed obligations (including the EMI for the new loan) do not exceed 50% of your income. This percentage can vary from lender to lender. For high income borrowers, this can range upto 65%