If you search your E-mail inbox or SMS inbox or think of how many call communications have happened for personal loan then it won’t be surprising that the count would be high. Definitely each one of us must have done numerous such communications either from lender or agencies who work on behalf of such lenders, forcing you to get personal loan at a lower interest rate and guaranteeing you with 100% approvals or pre-approved loan offers.
However what they don’t disclose is the eligibility criteria during the initial interaction. It is after submitting the application, you come to know that personal loan application is rejected.
One of the biggest factor for personal loan approval is the income (gross or net monthly) of the applicant in addition to documentation, employer, city, etc. In addition to this, there is one factor checked by the lender in the background without your consent is the credit score check done through credit rating agencies such as CIBIL, Experian, ICRA and few others which are prominent in India. However amongst all these factors, gross salary (or net salary) is the most important. This is because, repayment capacity of the applicant is judged on the basis of his/her income.
Here’s the table showing the gross or net monthly income required (less than Rs. 15,000 per month) for personal loan by various lenders in India, mainly the banks.
|Name of Bank and Perosnal Loan Product||Monthly Income Required|
|State Bank of India (Xpress Credit)||Rs. 5,000|
|Canara Bank (Consumer Loan)||Rs. 6,000|
|Abhyudaya Co-operative||Rs. 8,000 (after EMI payment)|
|Canara Bank (Canara Budget)||Rs. 10,000|
|Canara Bank (Teachers Loan)||Rs. 10,000|
|State Bank of India||Rs. 10,000 (rural/semi-urban)|
|HDFC Bank||Rs. 15,000|
|ICICI Bank||Rs. 15,000|
|Axis Bank||Rs. 15,000|
|Fullertoan loan||Rs. 15,000|
|Punjab National Bank||Rs. 15,000|
|Dena Bank (Suvidha)||Rs. 15,000|
As you can see, State Bank of India offers personal loan for low income earning individuals with monthly net income of just Rs. 5,000. So gross income requirement in this case should be around Rs. 6,000.
Benefits of Personal Loan
- Is the best solution for meeting emergency money requirement
- It is easy and quick to get. Especially for working professionals it becomes easier due to regular monthly income, which lenders check while evaluating credit worthiness.
- Tenure can be reduced.
- It can be prepaid but with extra charges, in some cases.
- Money can be used for any purpose.
- These are unsecured meaning applicant does not have to keep any collateral with the lender. Although there are ways to get personal loan against securities.
How can low income earners stop themselves from falling into the personal loan trap:
Bank is at the profit: Remember that, personal loan is the most profitable business for the lender. This is because of the high interest rate charged in addition to the other charges. Although it carries highest risk for the lending financial institutions but that risk is balanced through high interest rate. And also banks have rights to recover money from the borrower through various means.
Should be the last option: Personal loan should be the last option for your money requirement because the EMI can hurt your budget badly. Before seeking the loan, try to ask for money from your friends/relatives and in return pay them interest which is small compared to the high rates charged by the banks over the money granted. This way both the parties at the advantage.
Never agree on paying less EMI in return of long tenure: This looks enticing initially but is very costly when you calculate the total money you have to shell out of your pocket at the end of the tenure. It is always recommended to end any credit line in a short time frame. Longer the tenure, higher the money you will end up paying.
Be aware of extra charges which are hidden in the loan documents: In addition to the EMI, there are many other fees charged by the banks. Although these fees are not hidden but are actually never disclosed at the time of application or are not paid attention by the applicant. Such fees further increases the cost of the loan. The charges include – processing fees, late payment, pre-payment, cheque bounce, etc.
Try other alternatives for personal loan: Apart from commercial bank, poor income earner can also approach co-operative banks for personal loan. Interest rate and income eligibility criteria is low compared to large banks. Peer to peer lenders is another solution for the loan.
Finally signing on dotted line means you are caught in the trap: Because after signing, it becomes extremely difficult to go and win the legal battle against big financial institutions. Chances of winning the legal case are actually very low. And in addition, you will have to pay money to the lawyer, etc.