Personal loans have become increasingly popular among the Indian population as they offer a quick and easy way to access cash to meet unexpected needs or to finance personal projects. With interest rates that are often lower than credit cards, personal loans can be an affordable option for those who need to borrow money. However, it is important to determine how much you can afford to borrow before applying for a personal loan.
Many factors come into play when determining the insta loan amount that you can afford with a salary of Rs. 25,000in India. Your expenses, debt-to-income ratio, credit score, and other financial responsibilities will all affect how much you can afford to borrow. Here’s what you need to know.
What is a personal loan?
A personal loan is a type of unsecured loan that you can use for any purpose. Unlike a secured loan, such as a car or home loan, a personal loan does not require collateral. You can usually borrow money for a term of one to five years and repay it in fixed monthly instalments. Personal loans are offered by banks, non-banking financial institutions (NBFCs), and online lenders.
How much can you afford to borrow?
When you apply for a personal loan, the lender will look at your debt-to-income ratio to determine how much you can afford to borrow. Your debt-to-income ratio is the percentage of your monthly income that goes towards debt payments, including credit card balances, car loans, and any other outstanding loans or bills.
As a general rule, lenders prefer that your debt-to-income ratio be below 40%. However, some lenders may be willing to extend credit to borrowers with a higher ratio, depending on their credit score and other factors.
For example, if your monthly income is RS. 25,000 and your debt payments, including any credit card balances, car loans, and other loans, total INR 10,000, your debt-to-income ratio would be 40%. If you want to take out a personal loan, the lender will consider how much additional debt you can afford to take on based on your debt-to-income ratio and other financial responsibilities.
How to calculate your personal loan EMI
When deciding how much you can afford to borrow, it is important to determine what your monthly loan payments will be. You can use an online personal loan EMI calculator to estimate your monthly payments based on the loan amount, interest rate, and loan term.
For example, if you want to borrow RS. 25000 personal loan for a term of three years at an interest rate of 14%, your monthly loan payments would be INR 856. However, keep in mind that the interest rate you receive will depend on your credit score, income, and other factors.
How to improve your chances of getting a personal loan
If your debt-to-income ratio is high or your credit score is low, you may have difficulty being approved for a personal loan. However, there are steps you can take to improve your chances of being approved and to get a better interest rate.
First, you can improve your credit score by paying down any outstanding debts and making all of your payments on time. If you have a low credit score, you may want to consider a secured personal loan, which requires collateral, or a co-signer loan, which involves having a co-signer with good credit who is willing to be responsible for the loan if you default.
You can also shop around for the best interest rates and terms by comparing offers from multiple lenders. Online lenders, such as Insta Loan, may offer lower interest rates and faster approval times than traditional banks and NBFCs.
Determining how much personal loan amount you can afford with a salary of RS. 25,000in India depends on your debt-to-income ratio, credit score, and other financial responsibilities. You can use an online personal loan EMI calculator to estimate your monthly payments based on the loan amount, interest rate, and loan term. By improving your credit score and shopping around for the best interest rates, you can improve your chances of being approved for a personal loan and get the money you need to meet your financial goals.