Personal loan have become a popular financial tool these days, which fulfills the need of quick money without collateral. Whether it is a medical emergency, home improvement, or personal needs, personal loans provide flexibility and convenience. But if your monthly income is Rs. 20,000, then taking a personal loan of Rs. 5 lakhs can be a bit challenging, because the interest rates are high and the repayment capacity is low.
It is important to understand personal loan eligibility
Personal loans are unsecured, meaning there is no need for collateral. These are ideal for people who do not have assets but the interest rates are higher because of the risk. Lenders evaluate your eligibility based on a few factors:
1. Monthly Income: Your income determines your repayment capacity. Lenders want your EMI to be within 40-50% of your income.
2. Credit Score: A good credit score (750 or above) helps in getting a loan on favourable terms.
3. Age and Employment: Stable job and being in the age range of 21-60 years increases the chances of approval.
4. Debt-to-Income Ratio (DTI): If DTI is high, the risk of loan rejection increases.
Will I get a loan of ₹5 lakh in ₹20,000 salary?
Short answer: Yes, but it depends on your overall financial profile. ₹20,000 income is modest, but if your credit score is good and you have additional income sources, then you can get a loan. Some leading financial institutions that give personal loans up to ₹5 lakh:
| Bank/NBFC | Maximum Loan Amount |
|---|---|
| KreditBee | Up to ₹5 Lakh |
| Fibe | Up to ₹5 Lakh |
| MoneyView | Up to ₹10 Lakh |
| Axis Bank | Up to ₹10 Lakh |
| Tata Capital | Up to ₹50 Lakh |
Interest Rates and Loan Terms
- CreditBee
- Interest Rates: 16% – 29.95%
- Processing Fee: ₹1,250
- Loan Tenure: Up to 3 years
- Fibe (EarlySalary)
- Interest Rates: 16% – 30%
- Processing Fee: 0.1% – 3%
- Loan Tenure: Up to 3 years
- MoneyView
- Interest Rates: 14% – 36%
- Processing Fee: Up to 2%
- Loan Tenure: Up to 5 years
- Axis Bank
- Interest Rates: 11.25% – 22%
- Processing Fee: Up to 2%
- Loan Tenure: Up to 5 years
- Tata Capital
- Interest Rates: 11.99% – 35%
- Processing Fee: ₹101
- Loan Tenure: Up to 7 years
Challenges You May Have to Face
1. High Debt-to-Income Ratio: Taking a loan of ₹5 lakh on a salary of ₹20,000 can stretch your monthly budget.
2. Higher Interest Rates: Higher interest is charged on low income, which makes repayment expensive.
3. Risk of loan rejection: If income is unstable or credit score is low, then there is a high chance of loan rejection.
How to improve chances of loan approval?
1. Add a co-applicant: A financially strong co-applicant can improve loan eligibility.
2. Build a good credit score: Clear old debts and make timely payments.
3. Show additional income: Income from investments or side business will improve chances of loan approval.
4. Avoid hard inquiries: Making too many loan applications leads to low credit score.
Conclusion
Taking a personal loan of ₹5 lakh on a ₹20,000 salary is definitely difficult, but not impossible. Lenders check not only your income but also your credit history, employment stability and liabilities. Build a strong financial profile, improve your credit score, and demonstrate repayment capability. Most importantly, before taking a loan, it is important to understand your financial situation properly and make a repayment plan.
