Micro Loan

Empowering Individuals, Transforming Communities, Achieving Goals: Micro-Loans Made Easy
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What is a Micro-loan?

Micro Loans – It is a short-term loan with sufficient amount and is opted mostly by self-employed professionals, micro-enterprises, entrepreneurs, small businesses, and individuals with low capital requirements. Micro loans are the best choice for micro-entrepreneurs or low-income group families. It is usually for those individuals or organizations that are unbale to get conventional loan from banks. Initially, micro loans were curated with the intention of helping people in developing countries.

Eligibility Criteria and Documentation

  • Salaried Individuals
  • Self-Employed Individuals
  • NRI Applicants
  • Pensioners

What's the Eligibility Criteria and Documents Required for Salaried Individuals?

If you're a salaried person and want to apply for a Micro Loan, you must meet the following criteria.

Eligibility Criteria

  • You must be between 20 to 60 years of age
  • You must be Resident Citizen of India
  • You must be Salaried Individual Employed with an MNC Public Limited, or Private Limited Company
  • You must have a monthly income of at least Rs.15,000
  • You must have at least 1 to 3 years of work experience
  • You must have a Minimum Credit Score of 750

Documentation

  • Photo Identity Proof
  • Proof of Residence or Address Proof
  • Income Proof
  • Employment Proof
  • Form 16
  • Tax Return Certificates
  • Passport-Size Photographs

What's the Eligibility Criteria and Documents Required for Salaried Individuals?

If you're a salaried person and want to apply for a Personal Loan, you must meet the following criteria.

Eligibility Criteria

  • You must be between 20 to 60 years of age
  • You must be Resident Citizen of India
  • You must be Salaried Individual Employed with an MNC, Public Limited, or Private Limited Company
  • You must have a monthly income of at least Rs.15,000
  • You must have at least 1 to 3 years of work experience
  • You must have a Minimum Credit Score of 750

Documentation

  • Photo Identity Proof
  • Proof of Residence or Address Proof
  • Income Proof
  • Employment Proof
  • Form 16
  • Tax Return Certificates
  • Passport-Size Photographs

What's the Eligibility Criteria and Documents Required for NRI Applicants?

If you're a Non-Resident Indian and want to apply for a Personal Loan, you must meet the following criteria.

Eligibility Criteria

  • Age
    • Employed - 21 to 60 Years
    • Self-Employed - 21 to 68 Years
  • Work Experience
    • Employed - 2 Years with at least 1 Year in Current Organisation
    • Self-Employed - Minimum 2 years in Current Business
  • Required - Co-Applicant must be a Direct Close Relative

Documentation

  • Photocopy of Passport and Visa of NRI
  • Yours and Co-Applicant's Proof of Identity
  • Yours and Co-Applicant's Address Proof
  • Income Proof
    • 6 Months Indian and International Bank Account Statement for last 6 months
    • Salary Certificate in English or 6 Months Salary Slips
  • Employment Proof
    • Appointment Letter
    • Job contract
    • HR's email ID or official email ID
    • Labour | Identity card | CDC for NRIs working in the Middle East or employed in Merchant Navy
  • If present in India during the application, and you will have to provide Power of Attorney attested or notarized locally. In case away, you will have to provide the Power of Attorney attested by the Indian Consulate of NRI's Resident Country.
  • Passport-Size Photographs

What's the Eligibility Criteria and Documents for Pensioners?

If you're a Pensioner and want to apply for a Personal Loan, you must meet the following criteria.

Eligibility Criteria

  • You must be Under the Age of 76 years
  • You must provide a Third-Party Guarantee

Documentation

  • Photo Identity Proof
  • Proof of Residence or Address Proof
  • Proof of Income
  • Form 16
  • Tax Return Certificates
  • Passport-Size Photographs

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Benefits of Micro-loan

Accessibility

Many banks are usually hesitant to provide loans to individuals or businessmen who have little or no assets and also because the interest against these loans is quite minimalistic. This is where microloans come to the rescue with the ideology of providing small credits to uplift the economy at large.

Entrepreneurship Promotion

Microloans foster entrepreneurship and support the growth of small businesses. Many aspiring entrepreneurs lack the necessary funds to start their ventures, and microloans provide the initial capital needed for investment in equipment, inventory, or infrastructure.

Better Education opportunities

Children with low-income groups quite often have a negative impact in their education. Parents usually force them to work in order to regain financial stability. Microloans helps to avoid such situations where children will suffer the brunt of not going to schools by offering credit to people.

Enhanced Livelihood

The funds available at time in-hand can get replenished quite easily due to some emergency for instance health issues. Micro loan enables people to get a hold of their finance and provide better for their families even during the hard times.

End-usage Flexibility

The funds obtained can be used for a wide range of purposes. Borrowers can utilize the funds for various needs, including business investment, education expenses, medical emergencies, home renovation, or other personal requirements.

Types Of Micro-Loan?

Microloans for startups

Start-up microloans cater to aspiring entrepreneurs who lack the collateral or credit history required for traditional business loans. These loans offer small amounts of capital to fund the initial stages of a business venture, such as developing a prototype, conducting market research, or creating a business plan.

Business microloan

A business microloan is a type of microloan specifically designed to meet the financial needs of small businesses and entrepreneurs. Business microloans are often accessible to borrowers who may have difficulty obtaining financing from traditional banks due to limited credit history, lack of collateral, or smaller loan amounts.

Personal microloan

These loans are provided to individuals, often entrepreneurs or small business owners, to help them start or expand their businesses. Individual microloans can be used for working capital, purchasing equipment or inventory, or investing in business development.

Group microloans

Group microloans are provided to a group of individuals, typically from the same community, who collectively guarantee each other’s loans. This group lending model encourages peer support and accountability, where members support and ensure repayment of each other’s loans.

Agricultural microloans

These loans are specifically designed for farmers and individuals involved in agricultural activities. They can be used to purchase seeds, fertilizers, equipment, or to invest in irrigation systems or livestock. Agricultural microloans often have flexible repayment terms to align with seasonal income patterns.

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FAQ

Here are some general requirements that are commonly considered:

  • Timely Repayment: Lenders typically assess the borrower’s repayment history to determine their eligibility for renewal.
  • Good Credit History: Lenders may evaluate your credit score and credit report to assess your creditworthiness
  • Loan Utilization: Demonstrating proper utilization of the loan amount for the intended purpose and providing necessary documentation increases your chances of renewal.
  • Income Stability: Providing updated income documents, such as salary slips, bank statements, or other relevant proofs, can support your eligibility for renewal.

Yes, it is possible to pay off a Micro Loan before the due date in India. Paying off a loan before the scheduled repayment term is known as prepayment or foreclosure. It’s advisable to review your loan agreement or contact the lender directly to understand the prepayment policies, charges, and procedures specific to your Micro Loan.

The processing fee for obtaining a Micro Loan can vary depending on the lender and the specific terms of the loan. The processing fee typically ranges from 1% to 3% of the loan amount. It’s important to note that the processing fee is a one-time charge that is deducted from the loan amount disbursed to you.

In India, microfinance institutions (MFIs) generally offer micro loans without requiring collateral or significant assets. The objective of microfinance is to provide financial services to individuals who may not have access to traditional banking services or who lack the necessary collateral to secure a loan.

Here are some common factors to consider when determining eligibility for micro loans:

  • Income Level: Lenders assess the borrower’s income level to determine their repayment capacity.
  • Credit History: Having a positive credit history can be an advantage. If available, the lender may consider the borrower’s credit history to assess their repayment behavior.
  • Purpose of the Loan: The lender may evaluate the viability of the proposed business plan or the intended use of funds.
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