Highlight: Even if you have a low income, you can apply for a personal loan. Learn how to get a personal loan with a low income.
A financial emergency can occur at any time. But even without those occurring, you may need to take out a personal loan to achieve several of your life goals. This type of loan can be used for anything from a wedding to paying for a child’s education, purchasing a gadget, or even a medical emergency. It is entirely up to you to decide what you want to do with it. That’s why it’s called a personal loan, after all.
Banks do not require any collateral when you apply for a loan, as you may be aware. As a result, it’s classified as an unsecured credit service. It requires the same minimal documentation as a credit card loan. On loans, banks charge a fixed interest rate.
What is a personal loan?
When you apply for a personal loan, you are asking a lending institution, such as a bank or credit union, to lend you a specific amount of money. A personal loan can be used for a variety of purposes, unlike a mortgage, which must be used to pay for a home, and an auto loan, which must be used to finance a car purchase. You could use it to pay for college or medical expenses, a major household item like a new furnace or appliance, or to consolidate debt.
Personal loan repayment is not the same as credit card debt repayment. A personal loan requires you to pay fixed-amount installments over a set period of time until the debt is completely repaid.
Before you apply for a personal loan, you should be aware of the following terms:
- Principal: The amount you borrow is referred to as the principal. For example, if you apply for a $10,000 personal loan, the principal is $10,000. The lender uses the principal you owe to calculate the interest you’ll pay. The principal amount of a personal loan decreases as you repay it.
- Interest: When you take out a personal loan, you agree to repay it with interest, which is the lender’s “fee” for allowing you to borrow money and repay it over time. In addition to the portion of your payment that goes toward paying down the principal, you’ll have to pay a monthly interest charge. In most cases, interest is expressed as a percentage rate.
- APR: “Annual percentage rate” is what APR stands for. When you take out any type of loan, the lender will typically charge you fees in addition to the interest. The APR takes into account both your interest rate and any lender fees to give you a more accurate picture of your loan’s true cost. APRs are an excellent way to compare the affordability and value of various personal loans.
- Term: The term refers to the number of months you have to repay the loan. When a lender approves your personal loan application, they’ll let you know what interest rate and term they’re going to give you.
- Monthly payment: You’ll have to pay the lender a monthly payment every month during the term. This payment will include a portion of the total interest you’ll owe over the life of the loan, as well as money toward paying down the principal of the amount you owe.
- Unsecured loans: Personal loans are frequently unsecured loans, which means you don’t have to put up any collateral. The real estate you’re buying serves as collateral to the lender when you take out a home or auto loan. It is usually only secured by the borrower’s or cosigner’s good credit. Some lenders, on the other hand, offer secured personal loans, which require collateral and may offer better rates than unsecured loans.
What is the maximum amount of a personal loan that a salaried individual can obtain?
The maximum loan amount is entirely at the discretion of the bank. Some banks provide personal loans up to Rs. 50 lakhs, while others limit them to Rs. 25 lakhs. If you are a salaried employee, you can apply for a personal loan based on your annual earnings. The bank has complete discretion in determining the loan amount.
Suppose your monthly income is between Rs.20,000 and Rs.25,000, for instance. Banks calculate your EMI to be approximately 45-50 percent of your monthly income when it comes to monthly repayments. As a result, your personal loan’s average EMI will be around Rs. 12,5000.
Is it possible to get a personal loan with a monthly salary of less than Rs. 15,000?
Yes, you can get a personal loan with a low salary. Individuals with low incomes are frequently faced with a cash crunch due to a plethora of financial responsibilities. Low wages can be a barrier when applying for a personal loan; however, some banks or platforms like EarlySalary have come to your rescue to alleviate your concerns.
Even if your monthly income is less than Rs. 15,000, you can easily qualify for the loan.
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