What’s the Maximum Amount You Can Borrow With a Personal Loan?

The amount you can borrow with a personal loan in India typically ranges from ₹10,000 to ₹40,00,000. However, this can vary depending on your income, credit score, and the lender's policies. Some lenders may offer loans up to ₹50,00,000, while others may have lower limits. 

For instance, ICICI Bank provides personal loans up to ₹50,00,000, while Axis Bank and HDFC Bank offer loans up to ₹40,00,000. It is important to note that the final loan amount you qualify for will depend on your financial profile and the specific criteria set by the lender.

Here is a more detailed breakdown:

1. Lender Discretion

When you apply for a personal loan, the amount you can borrow depends on the lender's decision. Lenders look at your financial situation to decide how much money they can safely lend to you. This process is called "lender discretion".

What Does Lender Discretion Mean?

Lender discretion means that the bank or financial company decides the loan amount based on your ability to repay. They consider:​

• Your Income: How much money do you earn every month?
  
  
• Your Expenses: How much money do you spend on other loans or bills?
  
  
• Your Credit Score: A number that shows how well you have repaid loans.
   
• Your Job Stability: How long you have been working and how stable your job is.
  
  
• Lender's Policies: Each lender has its own rules about how much it can lend.

Even if you have a high income, the lender may give you a smaller loan if they think it is safer.

How Do Lenders Calculate Loan Amounts?

Lenders use different methods to decide the loan amount. Two standard methods are:​

1. Multiplier Method: The lender multiplies your monthly income by a certain number (10 to 24) to decide the loan amount.
   
   
2. EMI/NMI Ratio: The lender ensures that your total loan payments (EMIs) do not exceed a certain percentage (usually 50-55%) of your monthly income.

Example: Loan Amount Based on Income

A simple example showing how much loan you might get based on your monthly income, using the multiplier method (assuming 15 times your income):​

Note: This is a general example. Actual loan amounts can vary based on the lender's policies and your financial profile.

Important Points to Remember

• Different Lenders, Different Rules: Each bank or financial company has its own rules. Some may offer loans up to ₹50,00,000, while others may have lower limits.
  
  
• Credit Score Matters: A higher credit score increases your chances of getting a higher loan amount.
  
  
• Existing Loans Affect Eligibility: If you already have other loans, the lender may offer a smaller loan to ensure you can repay comfortably.
  
  
• Job Stability is Key: Lenders prefer borrowers with stable jobs and consistent income.

The maximum amount you can borrow with a personal loan depends on the lender's assessment of your financial situation. By maintaining a good credit score, managing your expenses, and having a stable income, you can increase your chances of getting a higher loan amount. Always compare offers from different lenders to find the best option for your needs.

2. Income and Repayment Capacity

When you apply for a personal loan, your income and repayment capacity are very important. Lenders use these to decide how much money they can lend you. They want to make sure you can repay the loan without trouble.

What Is Repayment Capacity?

Repayment capacity means how much money you have left after paying your monthly expenses and debts. Lenders check this to see if you can pay the loan EMI (Equated Monthly Installment) every month.

How Lenders Decide Loan Amount

Lenders use two main methods to decide how much loan you can get:

1. Multiplier Method

In this method, the lender multiplies your net monthly income (NMI) by a number (usually between 10 and 24) to decide the loan amount. For example, if your NMI is ₹40,000 and the multiplier is 15, you may get up to ₹6,00,000.

2. EMI/NMI Ratio

This method looks at how much of your income goes to EMIs. Lenders prefer that your total EMIs (including the new loan) are not more than 50-55% of your NMI. If your EMIs are higher, you may get a smaller loan or your application may be rejected.

Example: Loan Eligibility Based on Income and Existing EMIs

Let's see how income and existing EMIs affect your loan eligibility:

Tips to Improve Loan Eligibility

• Pay Off Existing Debts: Lower your current EMIs to increase your repayment capacity.
  
  
• Increase Income: A higher income can help you get a bigger loan.
  
  
• Maintain a Good Credit Score: A score above 750 is preferred by lenders.
  
  
• Choose a Longer Tenure: This reduces your EMI, making it easier to repay.
  
  
• Add a Co-Applicant: Combining incomes can increase eligibility.

Your income and repayment capacity are key to getting a personal loan. Lenders want to ensure you can repay the loan without stress. By managing your debts and maintaining a stable income, you can improve your chances of getting the loan amount you need.

3. Credit Score

When you apply for a personal loan, your credit score is very important. It helps the bank or lender decide how much money to lend you and at what interest rate. A good credit score means you are more likely to get a higher loan amount with a lower interest rate.

What Is a Credit Score?

A credit score is a number that shows how well you have managed your loans and credit cards in the past. In India, credit scores are usually between 300 and 900. A higher score means you have paid your loans on time and managed your debts well.

Why Is a Good Credit Score Important?

Banks and lenders use your credit score to decide:

• Loan Approval: A higher score increases your chances of getting the loan approved.
  
  
• Loan Amount: With a good score, you may be eligible for a higher loan amount.
  
  
• Interest Rate: A better score can get you a lower interest rate, which means you pay less money over time.

For example, a credit score of 750 and above is considered good for approving personal loans.

Example: Credit Score, Loan Amount, and Interest Rate

Here is a simple table showing how your credit score can affect your loan:

Note: These are approximate values. Actual loan amounts and interest rates can vary based on the lender's policies and your financial profile.

How to Improve Your Credit Score

To get a better credit score:

• Pay on Time: Always pay your loan EMIs and credit card bills before the due date.​
  
  
• Limit Credit Usage: Try not to use more than 30% of your credit card limit.
  
  
• Avoid Multiple Loans: Do not apply for many loans or credit cards at the same time.
  
  
• Check Your Credit Report: Look at your credit report regularly to fix any mistakes.
  
  
• Keep Old Accounts Open: Having old credit accounts can help your score.

Your credit score plays a big role in getting a personal loan. A higher score can help you get a bigger loan with a lower interest rate. By managing your finances well and paying your dues on time, you can improve your credit score and make it easier to get loans in the future.

4. Tenure

When you take a personal loan, the tenure – the time you choose to repay the loan – plays a big role in how much you pay each month and the total interest you pay over time.

What Is Loan Tenure?

Loan tenure is the period over which you repay your loan. It can range from a few months to several years. In India, personal loan tenures typically range from 12 months to 96 months (8 years).​

How Does Tenure Affect Your Loan?

• Shorter Tenure: You pay higher EMIs (monthly payments), but the total interest paid is less.
  
  
• Longer Tenure: You pay lower EMIs, but the total interest paid is more.

Choosing the right tenure depends on your monthly income and how much EMI you can comfortably pay.

Example: ₹5,00,000 Loan at 11% Interest

Let's see how different tenures affect your EMI and total interest:​

As you can see, a longer tenure reduces your EMI but increases the total interest you pay. For example, choosing a 48-month tenure instead of 30 30-month tenure lowers your EMI by ₹6,217 but increases your total interest by ₹45,046.

Tips for Choosing the Right Tenure

• Assess Your Monthly Budget: Ensure your EMI fits comfortably within your monthly income.
  
  
• Consider Total Interest: If you can afford higher EMIs, a shorter tenure will save you money in the long run.
  
  
• Use EMI Calculators: Online tools can help you compare different tenures and choose the best option for your financial situation.

The loan tenure you choose affects both your monthly payments and the total cost of the loan. By understanding how tenure impacts your loan, you can make informed decisions that align with your financial goals.

Other Factors

When applying for a personal loan, factors like your employment status, age, and the lender's internal policies can influence the loan amount you are eligible for. Different banks have varying criteria and offer different loan amounts.

Examples of Personal Loan Amounts Offered by Banks

Key Factors Affecting Loan Amount

• Employment Status: Salaried individuals may have different eligibility criteria compared to self-employed individuals.
  
  
• Age: Younger applicants with stable jobs might be eligible for higher loan amounts.
  
  
• Lender Policies: Each bank has its own internal policies that determine loan eligibility and amount.

It is essential to check with individual banks for their specific eligibility criteria and loan offerings. Always compare different lenders to find the best loan option that suits your needs.

Conclusion

The maximum amount you can borrow with a personal loan depends on many factors. Lenders look at your income, expenses, credit score, job stability, and existing loans to decide how much they can lend you. A good credit score and stable income can help you get a higher loan amount. 

Different banks have different rules, so it is important to compare offers before choosing a loan. Always check how much EMI you can afford and pick a tenure that fits your budget. By managing your finances well, you can improve your chances of getting the loan amount you need.

FAQs

1. What is the maximum personal loan amount I can get?

The maximum loan amount depends on your income, credit score, and the lender’s policies. Some banks offer up to ₹50,00,000, while others may have lower limits.

2. How does my income affect my loan eligibility?

Lenders multiply your monthly income by a factor (like 10 to 24 times) to decide the loan amount. Higher income usually means a higher loan limit.

3. Can I get a big loan with a low credit score?

A low credit score reduces your chances of approval and the loan amount. Most lenders prefer a score of 750 or above for better offers.

4. Does existing debt affect my loan eligibility?

Yes, if you already have loans, lenders may offer a smaller amount to keep your total EMIs within 50-55% of your income.

5. Can I increase my loan eligibility?

Yes, by improving your credit score, reducing existing debt, or adding a co-applicant with good income. Comparing lenders also helps get better offers.

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LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?