An individual applying for personal loan is always concerned about whether or not the loan will get approved, especially when the requirement is urgent; since financial institutions have become strict when approving application. And the most concerning category of the individuals are the low income earners, whose monthly income is less and there are very few lenders offering personal loan for low income earners.

In this article, we’ll specifically discuss about personal loan for Rs. 13000 salary earners.

Here are the key questions we’ll answer in this article:

1. Can a person earning Rs. 13,000 per month or Rs. 1,56,000 annually get personal loan?
2. What are the different options for Rs. 13000 earner to get personal loan?
3. What to do when loan application is rejected even after meeting the minimum income criteria?
4. How to save money on personal loan?
5. If I meet income criteria, will I get guaranteed personal loan?
6. I live in a non-metro city, can I get personal loan?

(1) Can a person earning Rs. 13,000 per month or Rs. 1,56,000 annually get personal?

The answer is YES. There are many lenders offering personal loan for low income earners. And listed in the below table are the financial institutions including government banks, private and co-operative banks.

So an individual earning up to Rs. 13000 per month is eligible to apply for personal loan at any of the above listed lenders.

But note that, income criteria is one of the basic requirement for personal loan. Refer below question

(2) What are the different options for Rs. 13,000 earner to get personal loan?

In India, there are multiple alternatives to get personal loan irrespective of the income, in India as follows.

(1) Banks – There are two options – Secured loan and Unsecured loan
(2) Peer to peer lending companies
(3) Mobile wallet companies
(4) Non-Banking Financial Services companies
(5) Private money lenders
(6) Friends/relatives
(7) From employer
(8) Against credit card
(9) Salary advance

So irrespective of the applicant’s income, he/she can use any of the above 9 alternatives to get personal loan.

(3) How to save money on personal loan or which is the cheapest option to get personal loan?

The simplest answer to the question is wherever the interest rate is lowest and there are 4 options:

1. Secured personal loan
2. Loan from your friends or relatives
3. Loan from employer
4. Salary advance

Let’s understand in detail:

(i) Secured personal loan or collateral loan

Collateral loans are offered against securities that the borrower needs to provide to the lender as a custody till the loan is fully paid. Since an individuals’ asset is under control of the lender, the interest rate charged is less compared to traditionally applied loan where the interest rate is minimum 16%, depending on the lender and individuals income, credit score, loan amount, tenure, etc.

Such loans are strictly recommended to genuine borrowers only because banks have complete rights to sell/freeze the assets kept with them as a collateral, in order to recover money.

Typically the securities banks accept are:

(1) Fixed deposit – Check out the article – personal loan against fixed deposit. Loan against FD is the best recommended as there is no processing fee, fast approval and disbursal, less documentation, borrower continues to earn interest on FD, interest is charged only on the used loan amount and not on the entire amount and of course the interest rate is lowest.

The interest rate is 2% – 3% higher than the FD interest rate. So for e.g. if the interest rate offered on fixed deposit is 8%, then the interest rate on loan against FD will be around 11%.

(2) Shares
(3) Mutual fund
(4) Property
(5) LIC policy
(6) Gold

So the key advantages of collateral loan are:

• Low interest rate
• No processing charge
• Zero prepayment penalty
• Loan amount depends on the value of the collateral.
• No income eligibility criteria

(4) What to do when loan application is rejected even after meeting the minimum income criteria?

If the bank rejects the unsecured loan application for Rs. 13000 income earner, then you can apply for the loan at:

1. Banks but for secured loan. Refer answer to FAQ-2 above.
2. Mobile wallet companies – These are wallet companies such as Paytm, Mobikwik who offer personal loan depending on the transactions made using their respective wallet.
3. Non-Banking Financial Services companies – These are financial services companies such as MoneyTap, MoneyView and others.
4. Private money lenders
5. Friends/relatives
6. From employer
7. Against credit card
8. Peer to peer lending companies
9. Salary advance

But remember that, you should first understand the reason for loan rejection and not apply for the loan everywhere. This is because it impacts the credit score. Too many application signifies the applicant is credit hungry.

(5) Does meeting the income criteria guarantees personal loan?

No. Income is the one of the basic requirement to apply for the loan. And in addition to the income; credit score, age, city, employer and other factors are taken into consideration.

The primary objective of the lender while approving is to reduce the risk of default.

(6) What are the other options other than the lowest interest rate, to save money on personal loan?

For a low income (Rs. 13,000) earner; there are more alternatives to save money on personal loan as follows:

(i) Loan from friends/relatives:

This is the first option everyone tries before applying for the loan.

However not everyone can lend money since they can invest their money somewhere else (e.g. share market or mutual fund) and earn return or they may already have some plan. So why not ask for loan from acquaintances and in return give them small interest? This way, their money will fetch return and you will also get the money.

By applying for an informal loan of this type, you risk making yourself look bad to the person who is providing it. This can lead to friction and misunderstandings, if the money is not repaid fully on time.

(ii) Loan from employer:

This is another excellent option to get loan for Rs. 13000 income earner directly from the company he/she is working in.

This kind of transaction which typically have very less interest than the traditional personal loan applied at other banks/NBFCs/peer to peer lending companies. And money is to be repaid in installments.

(iii) Salary advance:

You may also ask for salary advance from the employer, if the amount required is less. The biggest monetary benefit is that, there is no interest on the salary advance. Typically the installment is deducted from the salary and reflected in the pay slip.

Typically loan for employer and salary advance are offered only to those employees who’ve served in the existing company for a longer tenure. Basically trust factor comes into play, which is quite logical.

However this criteria varies on a case to case basis.

(iv) Choose a loan whose tenure is short

Longer the tenure, higher would be the interest borrower will be paying till the loan tenure ends. So always try to choose short tenure loan although the installment will be high.

(7) My salary is Rs. 13000 per month, but I reside in non-metro city. Will I get personal loan?

Yes, personal loan for Rs. 13000 income earner is possible irrespective of the city he/she lives in.

In fact, minimum income criteria of banks like HDFC and SBI is less compared to the applicant applying for loan in metro city such as Mumbai, Pune, Chennai, Bengaluru, New Delhi, etc.

Advantages of personal loan

1. Depending on where you apply for loan, large amount of money can be lent.
2. They can be used for whatever you want since it is not necessary to specify what the money will be used for.
3. From the beginning of the loan you know how much and when you have to pay for it.
4. It allows borrower to organize his/her personal finances.

Disadvantages of personal loan

1. You can’t renew them. If your loan ends, you have to reapply.
2. Most of the time, they carry various other charges in addition to late payment, interest rate such as processing fee, prepayment penalty, cheque bounce charges.
3. The interest rate charges are highest for unsecured loan.

Author Bio:

Hi, I am Nikesh Mehta owner and writer of this site.

I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business.

I can be reached at nikeshmehta@allonmoney.com. You may also visit my LinkedIn profile.