Choosing the right loan can make all the difference when faced with a financial crunch. Two common options available in India are Micro Loan and Personal Loan. While both provide financial assistance, they cater to different needs and borrower profiles.

Let's explore these loan types to determine which one suits you best.

What Are Micro Loans?

Micro loan, also known as microfinance loans, are small loan amounts typically offered to individuals, self-employed professionals, and small business owners who may not have access to traditional banking facilities. These loans are usually provided by microfinance institutions (MFIs), non-banking financial companies (NBFCs), and cooperative banks.

Key Features of Micro Loan:

• Loan Amount: Usually ranges between ₹5,000 to ₹2,00,000.

• Purpose: Ideal for small business owners, startups, or self-employed individuals.

• Eligibility: Often available to borrowers with lower credit scores.

• Interest Rates: Generally higher due to the smaller loan size and risk factor.

• Repayment Tenure: Shorter durations, typically between 6 months to 3 years.

• Processing Time: Quick disbursal with minimal documentation.

What Are Personal Loan?

A personal loan is an unsecured loan offered by banks and NBFCs that can be used for various personal expenses, including medical emergencies, weddings, travel, or debt consolidation. You can also opt for a personal instant loan if you need funds urgently.

Key Features of Personal Loan:

• Loan Amount: Ranges from ₹50,000 to ₹50,00,000.

• Purpose: Can be used for any personal financial requirement.

• Eligibility: Requires a good credit score (usually 650+) and stable income.

• Interest Rates: Lower compared to micro loans, but varies based on creditworthiness.

• Repayment Tenure: Longer durations, typically between 1 to 7 years.

• Processing Time: Quick approval and disbursal for eligible borrowers.

Key Differences Between Micro Loans and Personal Loan

Which One is Right for You - Mirco Loan Vs Personal Loan?

Choosing between a Micro loan and a personal loan depends on several factors:

Choose a Micro Loan if:

• You need a small loan amount to manage short-term business expenses or emergencies.

• You have limited access to traditional banking and lack a strong credit history.

• You are a small business owner or an entrepreneur needing capital for business growth.

• You prefer quick approval with minimal documentation.

Choose a Personal Loan if:

• You need a higher loan amount for significant expenses like medical emergencies, weddings, travel, or home renovation.

• You have a good credit score (700+) to qualify for competitive personal loan rates.

• You prefer flexible repayment options ranging from 1 to 5 years.

• You are salaried or self-employed with a stable income and financial history.

Documents Required for Personal Loan Application

Before you apply for a personal loan, ensure you have the necessary paperwork. The common documents for personal loan approval include:

• PAN Card and Aadhaar Card

• Income proof (Salary slips or Income Tax Returns)

• Bank statements for the last 3-6 months

• Address proof (Electricity bill, rental agreement, etc.)

Final Words!

Both micro loan and personal loan serve different financial purposes. If you need a small loan for short-term financial needs, a micro loan might be the right choice. However, if you require higher loan amounts with flexible repayment, a personal loan or a personal line of credit is a better option.

Before applying for any loan, compare personal loan rates, tenure, processing fees, and eligibility criteria from different lenders. Ruloans, India’s leading loan distribution company, can help you find the best loan options from 275+ banks and NBFCs. Whether you’re looking for a micro loan or a personal instant loan, apply through Ruloans for seamless processing and expert financial guidance.

Apply now and take control of your financial future!