Personal Loan for 20000 salary

Editorial Team: One Touch Finance

So you earn ₹20,000 a month and need a loan. The good news? You can totally get one. The hard part? Figuring out how. Let me walk you through exactly what banks want to see from you.

What banks are actually looking for

Here’s the real deal: when you go to a bank asking for a personal loan, they’re not trying to trick you. They just want to know if you can pay them back. And when you’re making ₹20,000 a month, banks do have some specific things they check:

• Your credit score needs to be at least 700 (though some banks might be flexible)
• Your debt-to-income ratio should stay below 40-50% (basically, don’t already owe too much money every month)
• You need to have worked at your current job for at least 1 year
• You usually have to be between 21-58 years old
• Your total monthly payments across all loans can’t be more than 50% of what you earn

Let me show you how to figure out that debt-to-income thing, because it sounds scarier than it actually is.

The debt-to-income ratio 

Say you already owe ₹5,000 a month in various payments. Here’s the math:

1. Add up what you already pay each month = ₹5,000
2. Divide that by your monthly income = ₹5,000 ÷ ₹20,000
3. Multiply by 100 to get a percentage = 25%

So your debt-to-income ratio is 25%. Banks like to see numbers under 40%, so you’d be in good shape.

The stuff that actually matters 

Your credit score is basically your financial report card

Think of your credit score like a grade on a test. The higher, the better. Here’s how it breaks down:

• Score of 750 or higher? You’re golden. Banks will approve you quickly and give you their best interest rates.
• Between 700-749? You’re good. You’ll probably get approved with normal rates.
• Between 650-699? It’s possible. But you’ll pay a bit more in interest.
• Below 650? It’s going to be tough. Banks will probably say no.

The thing is, banks like HDFC and ICICI really want to see 700+. But SBI might work with you even if your score is a bit lower.

How long you’ve been at your job actually matters

Banks want to know you’re not going to quit tomorrow. Here’s what they look for:

• You’ve been at your current job for at least 1 year
• You have at least 2 years of work experience total
• The longer you’ve been at a job, the better your chances

Why? Because a stable job means you can actually pay the money back.

What the RBI (India’s central bank) actually requires

The Reserve Bank of India makes the rules that all banks have to follow. Here are the big ones that affect you:

You can’t borrow so much that your total payments are more than 50% of your income. This is a hard rule. If you make ₹20,000 and already owe ₹5,000 a month, banks won’t let you borrow enough to add another ₹5,000+ in payments. It’s their way of making sure you don’t drown in debt.

Banks have to keep more money in reserves for personal loans now. Since late 2023, the RBI has told banks they need to set aside more cash for personal loans. This means banks are more careful about who they lend to. If your credit score isn’t great, you might not cut.

Banks have to be honest with you. They can’t hide fees or trick you. You get to see everything in writing.

Banks need to check your documents carefully. They’re making sure you are who you say you are and that your income is real.

What different banks are charging right now

This is where it gets real. Here’s what you’d actually pay with each major bank:

Here’s the thing: your rate depends on a bunch of stuff. Your credit score matters a ton. So does your job (corporate job vs. retail job). How much you already owe matters too. And if you already bank with them, they might give you a better rate.

If you have an amazing credit score (750+), you could get rates as low as 9.99%. But if your score is just okay, expect to pay more like 15-18%.

Why banks say no 

Banks reject loan applications all the time. But here’s the thing: it’s usually fixable.

Problem: Your credit score is too low

What you can do: Start paying all your bills on time, right now. Keep your credit card balances below 30% of your limit. Check your credit report for mistakes and dispute them. Give it 6-12 months. Your score will go up.

Problem: You already owe too much money

What you can do: Pay off some of your existing debt first. Or try to pick up extra income (freelance work, part-time gig, whatever). Just make sure your total monthly payments don’t eat up more than 50% of your paycheck.

Problem: You keep switching jobs

What you can do: Stay at your current job for at least 1 year. When you apply, bring a letter from your employer saying you work there. This proves you’re stable.

Problem: You don’t make enough money

What you can do: Ask a family member or friend if they’ll apply with you as a co-applicant. Someone with a higher income helps a lot. Or show banks that you have other income sources (rental money, side business, whatever).

Problem: Your paperwork is a mess

What you can do: Before you apply, gather everything. Your last 3 paychecks. Your bank statements for the last 6 months. Your tax returns for the last 2 years. A letter from your employer. Your ID and address proof. Make copies. Bring them all.

What documents do you actually need?

Banks are going to ask for these things. Get them ready before you apply:

• An ID (Aadhaar, PAN card, passport, or driver’s license)
• Proof of where you live (utility bill, rental agreement—nothing older than 3 months)
• Proof of income (your last 3 pay stubs, bank statements)
• A letter from your employer saying you work there
• Your tax returns from the last 2 years or Form 16
• A couple of passport-size photos

If regular banks say no, here are other options

Don’t stress if you get rejected by a bank. Other people’ll lend to you.

Peer-to-peer lending platforms

Websites like Faircent connect regular people who want to lend money with people who need to borrow. The rules are usually less strict than banks.

Microfinance companies

Places like Bandhan Bank and Ujjivan are specifically set up to help people who can’t get loans from regular banks. They do smaller loans and work with people making ₹20,000 or less.

Credit unions

If you’re part of a credit union or employee group, they might give you better terms than a bank would.

Loans with collateral

If you have something valuable (a car, jewelry, whatever), you can use it as collateral. Banks will lend you more money and charge less interest if they know they can take something back if you don’t pay.

How credit scores actually work

Your credit score is built from five things. Here’s what each one does:

• 35% comes from paying your bills on time (this is the big one)
• 30% comes from how much credit you’re actually using (if you have a ₹50,000 credit card limit, try not to use more than ₹15,000)
• 15% comes from how long you’ve had credit (longer is better)
• 10% comes from having different types of credit (a… is better than just one)
• 10% comes from how many times you’ve applied for new credit (don’t apply for everything at once)

The takeaway? Pay your bills. That’s the biggest thing.

The real risks you need to know about

Personal loans aren’t always great. Here’s what could go wrong:

You might pay way more than you thought. Personal loans have higher interest rates than mortgages or car loans. The money costs more.

One late payment can destroy your credit. Miss a payment or pay late, and it stays on your credit record for up to 7 years. This makes everything harder later.

You could end up owing way more than you borrowed. It’s easy to borrow more than you can actually afford to pay back. Be real with yourself about how much you actually need.

There are hidden costs. Read the fine print. Some loans charge you money if you pay them back early. Some have processing fees. Some have late fees that add up fast.

You could go into a debt spiral. If you borrow too much, your monthly payments could eat up half your paycheck. Then you can’t pay for anything else. Then you borrow more. It’s a trap.

So, can you actually get a loan?

If you make ₹20,000 a month, yes. You can get a personal loan. But here’s what you need to do:

Step 1: Check your credit score. Go to CIBIL or another credit bureau. See where you stand. If it’s below 650, focus on fixing that first.

Step 2: Do the math on your debt. Add up everything you owe every month. Make sure it’s less than 50% of your income. If it’s not, pay some stuff off first.

Step 3: Get your paperwork ready. Don’t wait until you apply to look for your pay stubs. Have everything ready to go.

Step 4: Compare what different banks are offering. Don’t just go to one bank. Call a few. Check online. See who’ll give you the best deal.

Step 5: Ask questions before you sign anything. What’s the interest rate? What are all the fees? What happens if you pay it back early? Get it all in writing.

Step 6: Think about whether you actually need the loan. Sometimes waiting 6 months and saving up is better than paying interest for 5 years.

Where to find all this information

Want to check current rates yourself? Here are the official places:

1. SBI – https://sbi.bank.in/web/interest-rates/interest-rates/loan-schemes-interest-rates/personal-loans-schemes

2. HDFC Bank – https://www.hdfcbank.com/personal/borrow/popular-loans/personal-loan/interest-rates-and-charges

3. Kotak Mahindra Bank – https://www.kotak.com/en/personal-banking/loans/personal-loan/interest-rates.html

4. Axis Bank – https://www.axisbank.com/retail/loans/personal-loan/interest-rates-charges

5. ICICI Bank – https://www.icicibank.com/Personal-Banking/Loans/Personal-Loan

6. Paisabazaar (compare all banks) – https://www.paisabazaar.com/personal-loan/

7. Bankbazaar (another comparison site) – https://www.bankbazaar.com/

Final thoughts

Getting approved for a loan when you make ₹20,000 a month is totally possible. The banks aren’t out to get you. They just want to know you’ll pay them back. So show them you’re reliable. Pay your bills. Keep your debt down. Have your paperwork ready. And don’t borrow more than you actually need.

If you get rejected the first time, don’t give up. Figure out why and fix it. Most of the time, you can.

And hey, if you’re not sure about anything, talk to a real financial advisor. They can look at your specific situation and give you advice just for you.