What if earning less did not stop you from getting a loan? Many low-income families struggle to access bank credit. A special type of loan now offers support without security. It could help with urgent needs or small business plans.
Microfinance loans are small loans for families earning below Rs 3 lakh yearly. You do not need to give property or assets as security. These loans help people who cannot access regular bank credit. They are meant to support small financial needs.
The Reserve Bank of India defines microfinance loans as collateral-free loans for low-income households. If any security is attached, it is not considered microfinance. These loans can cover education, farming, emergencies, or small business needs. The goal is to provide simple and easy credit.
Loan amounts usually range from Rs 10,000 to Rs 1.25 lakh. Repayment time is generally between one and three years. Smaller loans may have shorter repayment periods. Borrowers can choose weekly, fortnightly, or monthly payments.
Borrowers can repay the loan early without paying extra charges. Monthly repayments must not cross 50 per cent of household income. This rule protects families from heavy debt pressure. Lenders check income before approving the loan.
There is no fixed limit on interest rates for microfinance loans. However, lenders cannot charge unfair or extreme rates. The rate must follow a board-approved policy. It is based on cost of funds and borrower risk.
Only Reserve Bank of India-regulated lenders can give microfinance loans. These include banks, small finance banks, and regional rural banks. NBFCs, cooperative banks, and microfinance institutions can also offer them. Self-help groups and some NGOs may also provide support.
Applicants must be Indian citizens between 18 and 60 years old. Household income should be below Rs 3 lakh per year. The person must be involved in income-generating work. A clean credit history is also required.
Many Indians do not have access to formal banking services. Microfinance loans help fill this gap without asking for land or property. They give families a chance to grow small businesses. They also help manage emergencies or school expenses.
Microfinance loans offer structured and affordable credit to low-income households. They encourage responsible borrowing through clear rules. For many families, this may be their first formal loan. It can become a starting point toward financial stability and growth.
