How to get personal loan with low salary?
Want a personal loan but having a modest salary? Don’t worry there are many lenders offering personal loans for low salary individuals. You can still obtain the loan without having to submit any collateral. Though, most banks expect a monthly net salary of Rs. 15000 and above in order to sanction a personal loan, however if you are someone who earns less than that, there is still a chance to get the loan through NBFCs. If you get rejected by the banks while applying for a personal loan, you can apply through NBFCs who disburse loans without any hassles. Companies like Finnable, Bajaj Finserv, Hero Fincorp, Tata Capital, and Fullerton India distribute personal loans to individuals with low income. Some of these banks may require a guarantor as lending money to low income individuals is a risk.
Loan against Securities
A Personal loan is an unsecured loan which means lenders distribute the loan without taking any collateral. However, when the borrower is from a lower income bracket, then his repaying ability comes into question. As lenders feel their money is at risk, there are reluctant to provide personal loan without any security. Certain lenders may provide credit after taking collateral (like property, vehicle, or gold). Failure to repay the amount on time would declare in a lot. With security, the loan amount is disbursed at about 80-90% of the valule of the security
How much loan you can get?
Lenders calculate the loan amount based on your income level and repaying ability. They would want the EMI to be 50-60% of the Net Monthly Income (NMI). If your annual income is 3 Lakhs, the lender would sanction a maximum loan amount of 1.5 Lakhs. Please note that 50% of the amount will be applicable only for people with good credit score. For low income borrowers, it will be even lower
Use EMI calculator
Using an EMI calculator would help you arrive at a figure. There are many loan aggregator sites in the market that would allow you to compare the features and benefits of loans along with their EMIs. Doing so, would help you determine how much that will out of your hand as EMI in advance; using which you can plan your monthly budget efficiently.
Documents required for Personal Loan for low income individuals
- ID Proof
- Photo Proof
- Income Proof (Salary slips for past 2-3 monts, form 16)
- Last three months bank statements
- Duly Filled application form
Strategies to improve your chances of securing a personal loan with a low income:
- Improve Your Credit Score: A higher credit score can compensate for a lower income. Make sure to pay your bills and existing debts on time, keep your credit utilization low, and avoid applying for multiple loans or credit cards simultaneously. Over time, these responsible credit habits can help improve your credit score and increase your chances of loan approval.
- Build a Good Credit History: If you have a limited credit history, consider building it by responsibly using a credit card or taking out a small loan. Make timely payments and keep your credit utilization ratio low. A positive credit history can demonstrate your creditworthiness to lenders.
- Explore Secured Loans: Secured loans require collateral, such as a savings account, a vehicle, or other valuable assets. By offering collateral, you provide the lender with a form of security, which can increase your chances of loan approval even with a low income. However, be aware that defaulting on a secured loan can result in the loss of the pledged collateral.
- Find a Cosigner: If you have a trusted family member or friend with a higher income and good credit history, you can ask them to cosign the loan. A cosigner essentially guarantees the loan and agrees to take responsibility for repayment if you’re unable to fulfill your obligations. This can help you secure a loan with a low salary, but remember that both you and your cosigner share the responsibility for repayment.
- Reduce Loan Amount: Applying for a smaller loan amount can increase your chances of approval. Assess your needs carefully and borrow only what you absolutely require. By minimizing the loan amount, you also reduce the risk for lenders, making your application more attractive.
- Explore Alternative Lenders: Traditional banks may have stricter income requirements, so consider exploring alternative lenders such as online lenders, credit unions, or peer-to-peer lending platforms. These lenders often have more flexible criteria and may consider other factors beyond your income when evaluating your loan application.
- Provide Strong Justification: When applying for a personal loan, clearly explain to the lender why you need the loan and how you intend to repay it. Highlight any additional sources of income, such as part-time work or freelance gigs, to demonstrate your ability to manage the loan payments.
- Prepare Detailed Documentation: Compile all necessary documentation, including bank statements, pay stubs, tax returns, and any other proof of income or financial stability. By providing comprehensive documentation, you can demonstrate your financial situation more effectively to the lender.
- Seek Credit Union Membership: Credit unions are known for their community-focused approach and may offer more flexible lending options. Explore membership opportunities with local credit unions and inquire about their personal loan options for individuals with lower incomes.
- Consider Alternative Forms of Credit: If a traditional personal loan is not feasible, consider alternative forms of credit, such as a secured credit card or a credit-builder loan. These options can help you build or repair your credit history, improving your future borrowing prospects.
Remember to carefully consider the terms and interest rates associated with any loan you apply for. Borrow only what you can comfortably afford to repay, and compare multiple loan offers to find the most suitable option for your financial situation.