Why Is Gross Income Important While Taking A Personal Loan?

"Learn why gross income is important for personal loan approval. Higher income means lower interest rates and better terms. Apply now with My Mudra."

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4 mins read

Published: 13 May 2024

Updated: 13 May 2024

Understanding Gross Income

Gross income is the total earnings of an individual before any deduction (taxes, insurance, or retirement contributions), also known as pre-income. It comprises various sources of income, such as wages, rental income, alimony, and any other inflows of capital that contribute to the individual's overall finances. Many people get confused between gross income and net income. The personal loan EMI calculator helps to calculate the finances you need to manage after availing a personal loan. Income is one of the factors which affects personal loan interest rates.

Role of Gross Income for Personal Loan Approval and the Tips to Optimize it:

Here are some points of importance of gross income and utilization of this income in approval of personal loan:

1. Complete Documents of all Income Sources:

Make sure that all your sources of income are properly and completely documented and accounted for. Which includes not only your salary but also the bonus you get, rental income, alimony, and any other parallel income. A clear view of the gross income of an individual provides lenders with a clearer picture of the borrower's financial capability.

2. Debt Management:

Consider repaying your existing debt to improve your debt-to-income ratio and also your credit score. A maintained credit score and DTI ratio enhance your personal loan availability along with it proves you to be a responsible borrower. 

3. Improve Employment Stability:

Borrowers with stable employment are favoured by lenders. Specific employment such as in a particular industry or specific company or employer increases the borrower's reliability in front of the lender. So try to secure your job in a reputed and well-established company or industry to increase your chances of getting a personal loan. 

4. Increase Income:

Consider increasing your gross income through various sources apart from your full-time job. You can work part-time jobs or even as a freelancer to enhance your total income. High gross income will increase the chances of availability of personal loans. 

How does gross income affect personal loans?

The gross income of an individual affects the availability of personal loans in various ways:

1. Interest Rate

A higher gross income means a lower risk for the lender so the interest rate will be lower comparatively. In the same way, a borrower with a low gross income will get a loan at a higher rate of interest since it involves a higher lending risk for the lender.

2. Loan Amount

Gross income is also used to decide the maximum loan amount that can be given to the borrower.

3. Repayment Terms

As mentioned before also, high gross income means less risk for the lender, so the borrower may get a loan for longer tenure with lower monthly EMIs. On the other hand, for a borrower with a low gross income, there is a chance that the borrower will get a short-term loan with high EMIs increasing the repayment burden on the borrower.

4.Personal Loan Eligibility

Lenders usually see the gross income of the borrower to assess the repaying capacity. Often lenders also set a minimum income limit to provide a personal loan. In case a borrower has low income then a personal loan may not be available. Even if it is available, then it will not be on their favourable terms.


Gross income is one of the important factors to avail yourself of personal loans online. It helps in determining the interest rates, repayment terms, loan amount, and personal loan eligibility. The personal loan calculator is the perfect tool for determining your repayment obligations. You can get up to Rs 10 lakh instant personal loan funds with a quick disbursal process. You can apply for a personal loan online through the official website of My Mudra. With My Mudra personal loan, you get to enjoy instant approval, quick disbursement, flexible tenure, and minimal paperwork.

I hope this blog helped you understand the importance of gross income in getting eligible for a personal loan. So it is advised to consider your gross income before applying for a personal loan. This can help an individual to make informed financial decisions, secure favourable loan terms, and achieve their financial goals without any hassle. 

Frequently Asked Questions

1) Does a personal loan depend on salary?" or "Are personal loans based on income?"

Ans: Yes, a personal loan depends on the salary of the applicant but there are several factors including credit score, repayment history, and more. 

2) How is a personal loan calculated based on salary?

Ans: The amount of a personal loan is decided by the lender but typically the amount given is 30 times the monthly income of an individual.

3) What is the maximum Personal Loan eligibility on salary?

Ans: The personal loan eligibility varies from lender to lender depending on their eligibility criteria. The Eligible Loan amount ranges between Rs. 50,000 to 1 Crore and Minimum Eligible Income is Rs. 20,000.

4) What can improve the chances of securing a personal loan with favourable terms?

Ans: There are many factors that can improve the chances of securing a personal loan. The factors include; credit score, loan amount, income, and relation with the lender. So do consider these factors while availing a personal loan.

Also read: How Does One Apply for a Rs 50 lakh Personal Loan?

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