Are you running a microenterprise or a self-employed individual? We understand that you have a low capital requirement or even less. Don’t worry! Access to reputable lending institutions like NextBigLoan can help you obtain a smaller loan for your diverse requirements.Â
A small, short-term, micro personal loan is just what you need. Small firms and business owners might lack standard banking services, but they can always get the most out of a Micro loan.Â
What is a Micro Personal Loan?
As a small, short term loan, a micro personal loan is usually offered to individuals in need of instant financial assistance to meet their business expenses. Also known as a microfinance loan, it helps individuals who can’t acquire funds from regular banks. Individuals with limited income, small business owners, and those looking to start a business can secure this loan.
A micro personal loan provides much-needed financial assistance to individuals, allowing them to earn a livelihood and create jobs. Thus, it helps them improve the standard of living for the people living below the poverty line.
Who is Eligible to Use a Micro Personal Loan?
Listed below are the individuals who meet the eligibility requirements to secure a micro loan:
- Startups operating on a small scale
- Traders
- Manufacturers
- Retailers
- Women Entrepreneurs
- Self-employed Individuals
- Unemployed IndividualsÂ
- Sole Proprietorship
- Minorities
- Minimum Wage Workers
What is the Purpose of Using a Micro Personal Loan?
Individuals or small business owners who have difficulty in availing of a bank loan facility from a conventional bank. In such a situation, they look no further than a microloan. The purpose of introducing these loans was to help small businesses or startups perform diverse business-related activities, including:
- To build an entrepreneurial venture
- To maintain the cash flow daily
- To meet the working capital requirementÂ
- To bring debts under one loan
- To tackle daily expenses
- To handle employee salary payments
Features and Benefits of Micro Personal Loans
A micro Personal loan, also known as a micro loan, provides financial support to those individuals who have difficulty qualifying for conventional bank loans for various reasons. These include a lack of credit history, a lower level of income, or limited collateral. MFIs (Microfinance institutions) usually offer these loans.Â
Here is a list of some of the most significant features that give them an edge over other types of loans:
Loan Amount | The financial institution allows an individual to borrow a sum ranging from a few thousand to a few lakhs of rupees. This amount may not seem high in comparison with personal loans. However, they can make a great impact on people looking for instant access to funds for urgent expenses. |
Interest Rate | A micro loan has a somewhat higher interest rate compared to a personal loan. This is because lending agencies incur higher administrative costs linked to processing loans of smaller amounts and working with individuals with a higher risk. However, the interest rate can differ, but it depends on the financial institution and the individual’s credibility. |
Collateral Requirements | A small business owner can reap the benefits of a micro loan without showing any collateral. This loan works in favor of Individuals without valuable assets. |
Repay Terms | One of the best things about obtaining a micro loan is that it usually offers a shorter repayment period, ranging from a period of a few months to 3 years. As the borrower of a micro personal loan, you can repay the loan easily. Avoid long-term debt obligations! |
Quick and Easy Approval | These loans generally have a simplified application process with quick approval times, often within a few hours or days, ensuring fast access to funds when you need them most. |
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Types of Micro Loan
A micro loan can be found in different types readily available to meet borrowers’ diverse needs. These loans help improve economic growth, support self-employment, and alleviate poverty.Â
Education Loans
These loans make it easier for families to cover their children’s educational costs. One can use this loan for various expenses, such as books, tuition fees, uniforms, and miscellaneous costs. Children must have access to education, as it’s crucial for their future.
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Emergency Loans
With no interest, emergency loans can be accessed throughout the year to help with unforeseen costs. These include funeral expenses or medical emergencies. They provide rapid financial assistance to individuals when they need it the most.
Income Generation Loans
When starting or expanding a small business or microenterprises, such as a small tailoring shop or neighborhood café, the amount you borrow for your small business is based on your financial ability to repay.
Individual Loans
These loans are for individuals who are in a condition to provide collateral and a guarantor. They are not as similar as group loans, requiring a meticulous evaluation of the borrower’s business and income.
Agriculture Loans
An agriculture loan is a microloan specifically granted to farmers and individuals engaged in agricultural work. They help the farmers to purchase crucial supplies, including fertilisers, equipment, livestock, etc. Agriculture loans help boost the quality and production of the crop.
Consumer Product Loans
A consumer product loan helps individuals to purchase vital items, enhancing their day-to-day life. The items consist of cook stoves, solar lights, or mobile phones. This makes borrowers gain access to significant products that improve an individual’s quality of life.
Why are Micro Personal Loans Gaining Immense Popularity?
- Fast Approval and Disbursal –Â
- Micro personal loans are processed by most institutions in as little as 24 hours.
- Digital KYC and digitized underwriting allow quicker processing.
- Some platforms offer rapid loan approvals. However, lenders consider pre-approved credit scores.
- Less Paperwork –Â
- Minimal documents required, including an Aadhaar card, PAN card, salary slips, and bank statements.
- A practical solution for self-employed individuals.
- Flexibility in Loan Amounts –Â
- Get what you require – nothing more, nothing less.
- Borrow the funds as low as â‚ą5,000, and the maximum amount you can borrow is up to â‚ą5,00,000. However, it depends on the lender what amount is to be granted.
- Short Repayment Tenure –Â
- The loan repayment period usually ranges from 1 month to 2 years.
- Ideal for short-term needs without committing to long-term debts.
- Suits Every Profile –Â
- Small business owners, micro firms, startups, or self-employed individuals can apply for a Instant cash loan in few minutes without hassles.
- Customized for individuals having no credit history.
How do Micro Personal Loans Work?
- Online Application :-Â Pick the platform of your financial institution.
- Enter your personal and financial details.
- Uploading Documents :-Â Ensure you submit digital copies of your required documents.
- Credit Assessment :-Â Financial institutions rely on credit checks based on AI and alternative data. They help them evaluate the credibility of an individual applying for a microloan.
- Approval and Disbursal :-Â Once the lender approves your loan application, the amount is transferred to your account in no time.
- Repayment:-Â Make a loan repayment via an EMI every month. You can also consider a one-time settlement depending on the selected plan.
Documents You Need to Apply for a Micro Personal Loan
The documents you need to apply for a micro personal loan depend on the financial institution. You have no idea what documents they might ask for.Â
Here is a list of the must-have documents required by financial institutions before approving your application for a micro loan:Â
- Address Proof
- Duly Filled Application Form
- Passport-size picturesÂ
- Ration Card
- Passport
- PAN Card
- Credit ReportÂ
- Partnership Deed
- The previous 6 months’ bank account statements
- Last 2 years’ audited financials
Eligibility Criteria for Micro Personal LoansÂ
You must consider a few crucial eligibility requirements when applying for a micro personal loan. These are as follows:Â
- No Other Loans: Ensure you don’t have any other loans from any of the financial institutions.Â
- Pending Loan Limit: Don’t forget that your total outstanding loan amount does not go beyond ₹1 lakh. That way, it becomes easier for you to manage your debt.
- Job and Income Stability: You must have a stable job with a reliable income. This gives assurance to the financial institution that you can make a loan repayment without hassles. Also, it makes you a borrower that any lender can trust without a second thought.
- Required Documents: Ensure all your documents are ready for the loan application. Some of the most common documents you require consist of identity proof, address proof, income proof, bank statements, etc., as required by the lender.
- Active Bank Account: Your bank account must be up and running. This is necessary because it allows the lender to process the loan amount and its repayment without hassles.
Final Thoughts
An individual looking for a small loan with shorter repayment terms can opt for a micro personal loan from a reliable financial institution. Before deciding on a micro personal loan, you must assess your requirements and compare various lenders. Then go ahead with the option that complements your financial goals.
