Personal Loan For Rs 8,000 Salary

Personal loans have grown significantly in popularity over the past few years, prompting numerous banks and non-banking financing companies (NBFCs) to offer them at competitive interest rates and repayment terms.

The main reason these loans are getting popular is that the money borrowed can be used for a variety of personal purposes. These could include paying for medical expenses, consolidating or paying off existing debt, financing home improvements, or lifestyle expenditures such as buying household appliances or going on a vacation.

Personal loans are unsecured loans, and are relatively simple for salaried as well as self-employed professionals to apply for and get approved for. This is because these loans don’t require collateral and only minimal paperwork.

Since personal loans don’t require any collateral, banks and NBFCs have fixed certain eligibility parameters and a minimum income level for borrowers to take out a personal loan.

Most lenders require borrowers to earn a monthly salary of at least Rs 15,000-20,000 to be eligible. So, can someone with a salary below this range, say those earning around Rs 8,000 a month, get a personal loan?

It will indeed be difficult for people with income of Rs 8,000 to get a personal loan since lenders see borrowers in the low-income category as risky customers, especially because this type of debt doesn’t require any security. In other words, if the borrower defaults, lenders don’t have a recourse to recover their money.

Nevertheless, some NBFCs, new-age fintech lenders as well as a handful of private banks may provide personal loans to borrowers with lower monthly incomes. But even if they do, they will offer loans at high interest rates and ensure the borrowers meet other eligibility conditions.

What Impacts Personal Loan Amount?

Apart from monthly income, lenders look at a few other factors before deciding on approving a personal loan. These factors are:

• The borrower’s credit score
• The debt-to-income ratio
• The employment history for one to three years
• Bank statements for three to six months

So, what may help low-income borrowers get a personal loan is a strong credit score, a low debt-to-income ratio, stable employment history and bank statements that show a healthy financial profile.

Credit Score

In general, lenders approve personal loans to people with credit scores of 750 or above. The credit score, which ranges from 300 to 900, is calculated by credit information bureaus on the basis of a person’s past credit behaviour that includes previous or existing loans and repayments. A borrower who has paid previous loans timely will have a higher credit score than someone who may have defaulted.

Debt-To-Income Ratio

The debt-to-income ratio reflects a borrower’s debt repayments to monthly incomes. Essentially, the ratio is the percentage of gross income, before taxes, that goes towards payments for rent or housing loan, credit card debts or other obligations. Lenders seek to ensure the borrower’s debt-to-income ratio is no more than 40%-50% of their monthly salary. 

Typically, lenders approve personal loans up to 10-20 times a person’s monthly income. However, this range is generally applicable to people who earn a salary of more than Rs 15,000-20,000.

By this yardstick alone, a person with a salary of Rs 8,000 should be able to get a personal loan of Rs 80,000 to Rs 1.6 lakh. In reality, a person earning a salary of Rs 8,000 may have difficulty getting a personal loan in the first place. Even if a lender does approve a loan, the amount could be much lower and would depend on other factors mentioned above.

Conclusion

Most big lenders put borrowers with a monthly income of Rs 8,000 into the high-risk bracket. This makes them more careful of lending to this set of borrowers. Nevertheless, some non-banking finance companies, fintech lenders and smaller banks may provide loans to people earning less than Rs 8,000, albeit at higher interest rates and provided they meet other eligibility conditions such as a a high credit score a low debt-to-income ratio.

Before starting the loan application process, a borrower from this income segment should research the eligibility requirements, interest rates and repayment terms of lenders.

Borrowers should also look for well-known and reputed lenders for a loan and avoid, if possible, little-known lenders or those not regulated by the Reserve Bank of India. One of the most reputed lenders in the market for a personal loan is Mumbai-based IIFL Finance. The leading NBFC provides personal loans starting from Rs 5,000 to up to Rs 5 lakh at competitive interest rates and flexible repayment terms.