A microloan is a type of microfinance. Microloans are small loans offered to people who are less served with credit. They are short-term loans and have higher interest rates. Microloans are offered without collaterals and are the best choice for quick funding needs. Non-Banking Financial Institutions are the leading players in the microloans sector due to their widespread presence in remote areas of the country.
CIBIL™ score For A Microloan
Though Microloans are small loans, a credit score is nowhere an exception. The importance of the CIBIL™ score for micro-loans has increased dramatically. The CIBIL™ score is now insisted on for many microloan applications as it is the measure of financial credibility.
- A CIBIL™ score of 750 and above can get you instant micro-loans with attractive interest rates.
- A CIBIL™ score between 650 and 750 is good enough to get micro-loans without any offers.
- Anything below 650 is considered bad and the lenders will not be keen to offer microloans.
How To Check Your CIBIL™ score?
You can visit the official website of CIBIL™ and create a login account to check your CIBIL™ score.
Micro Loan Lenders
- Annapurna Microfinance Private Limited
- Asirvad Microfinance Limited
- Equitas Small Finance
- Bandhan Financial Services Private Limited
- Fusion Microfinance Private Limited
- Arohan Financial Services Private Limited
- BSS Microfinance Private Limited
- Fincare Business Services Limited
Credit unions and some public sector banks also offer microloans to eligible persons.
Terms Of Micro Loan
Amount of loan
Rs 1,000 to Rs 100,000
18% to 26%
3 months to 5 years
1% to 2% of the loan plus GST
Benefits Of A Micro Loan
- Small amounts to meet emergency needs
- Quicker processing and instant approval
- Minimum documentation requirement
- Funding for the unserved and underserved sector
- Easy access to credit
- Encourages employment creation
CIBIL™ score And Its Relevance For A Micro Loan
CIBIL™ score is a 3 digit number that summarises your repayment history. The higher the score, the better your position in getting funds with low-interest rates without any hassles. It also means that you are creditworthy and prompt in repaying all your debts. It is a general contention that since microloans are small loans, the CIBIL™ score will not be analysed for sanctioning. But microloan lenders are now increasingly considering CIBIL™ scores to avoid risky lending. The interest rates are also higher for a microloan, and hence it is very important to establish the credit standing of the borrower before approving a loan. CIBIL™ score is the standard measure to assess the creditworthiness of a loan applicant.
Eligibility To Get A Micro Loan
- The applicant must be a resident of the village or panchayat in which the microfinance institution operates.
- He/she should not have availed of microfinance from any other provider.
- He/she should not have outstanding liability (prescribed limits) as of the date of application.
Documentation Required to Get A Micro Loan
Proof of Identity
Aadhar card, Voter ID, NREGA card, Driving licence
Proof of Address
Aadhar card, Ration card, Latest utility bills, Rental agreement
Business and financial standing
Certificate of incorporation, business licences, partnership deed
Last 6 months’ bank statements
Audited financial statements for 2 years
Income tax returns for 2 years
Process Of Getting A Microloan
- Visit the official website of the microfinance lender.
- Apply online by providing your mobile number and other basic details.
- The authorised representative of the lender will keep in touch for further steps.
You can visit the small finance banks in your locality physically and make an application for a microloan. The representative will guide you through the process.
Microloans are enablers of the economy. While many rural areas of India are still struggling to get banking facilities, microfinance can help them to sail through turbulent times. The repayment tenure is flexible and is fixed according to the repayment capacity. It is very important to check your CIBIL™ score if you already have loan obligations before applying for a microloan. This can ensure you get the required funding without any difficulties.
FAQ of What Should Be Your CIBIL Score Before You Apply For A Micro Loan Online
1:What is the interest rate on a microloan?
The interest rate on a microloan typically ranges between 18% and 26%
2:Is the CIBIL™ score relevant even for a small loan?
Now many banks and NBFCs are increasingly considering CIBIL™ scores for small loans as well. For loans whether small or big, ensuring the repayment capacity is very important for any lender.
3:Can I get a microloan with a credit score of 450?
No. Kindly take steps to improve your credit score. Your credit score must be at least above 600.
4:Why should I check my CIBIL™ score before applying?
This avoids the chances of your application being rejected. When you check your CIBIL™ score before applying, you can have a fair view of the approval of your microloan application. You can take the necessary steps if your CIBIL™ score is low and then apply.
5:How frequently can I make enquiries on my CIBIL™ score?
The direct CIBIL™ enquiries made by you are called soft enquiries. There is no restriction on making soft enquiries and you can as many times as you want.