Published on Feb 24, 2025Updated on Feb 28, 2025
When seeking financial assistance, choosing the right loan can make all the difference. Two common options you may come across are micro loans and personal loans.
Understanding the differences between them is crucial to finding the best solution for your needs.
This post breaks down micro loans vs. personal loans, comparing their unique features to help you make an informed decision.
Micro loans could be useful for professionals, businesses, or individuals having low capital needs. They are generally taken for short-term financial needs such as covering small payments or handling unexpected operational expenses.
Let’s understand micro loans in detail by delving into their key features.
The loan amount typically ranges from INR 5,000 to INR 3 lakhs*, depending on the lender. One of the key micro loan benefits is that they provide quick financial assistance, especially to individuals from low-income groups who may find it challenging to secure larger loans.
Repayment periods usually range from a few months to 3 years. This shorter tenure is ideal for borrowers who need a small loan and prefer to repay it quickly, reducing long-term debt obligations.
Micro loans often come with higher interest rates due to the increased risk associated with lending to individuals or small businesses who may not have the strongest income or creditworthiness. The combination of higher rates and shorter repayment terms can increase the overall repayment burden.
Depending on the lender, collateral may or may not be required.
Personal loans provide financial support for a variety of needs, including higher education, medical emergencies, home repairs, and debt consolidation.
They are a popular financing option due to their flexibility and the following key features:
Personal loans typically offer substantial loan amounts, ranging from INR 50,000 to INR 30 lakhs*, depending on the lender’s policies.
Borrowers with a strong credit score, stable income, and a good employment history can qualify for higher loan amounts, providing the flexibility to cover significant expenses.
The repayment tenure generally ranges from 12 to 60 months*, allowing borrowers ample time to repay the loan while managing other financial obligations. This flexibility can be particularly helpful during emergencies, reducing immediate financial strain.
Personal loan interest rates are usually competitive, which can help reduce the monthly repayment burden and overall loan costs. The final rate is set by the lender depending on several factors such as the borrower’s credit history, income, existing debt obligations, and so on.
Online personal loans are typically processed and disbursed quickly, depending on the applicant’s eligibility and the completeness of the submitted documents. This makes them an excellent option when urgent access to funds is required.
Personal loans are usually unsecured, meaning borrowers are not required to pledge any assets. This makes them more accessible to individuals or businesses that may not have significant collateral to offer.
|
Feature |
Personal Loan |
Micro Loan |
|
Loan Amount |
Substantial, ranging from INR 50,000 to INR 30 lakhs* |
Lower, ranging from INR 5K to INR 3 lakhs* |
|
Interest Rate |
Usually competitive, based on credit profile, eligibility, and lender policies |
Can be higher due to shorter tenure and borrower risk |
|
Tenure |
12 to 60 months* |
A few months to 3 years |
|
Credit Score |
A score of 750+ with strong creditworthiness is ideal |
Some lenders may consider lower scores |
|
Collateral Required |
No collateral is needed |
Collateral may or may not be required |
*Loan amounts vary based on lender terms and borrower eligibility.
The choice between micro loans and personal loans ultimately depends on your financial needs and repayment capacity.
Personal loans are an ideal option for those seeking substantial loan amounts, flexible repayment tenures, and competitive interest rates. At SMFG India Credit, you can access personal loans up to INR 30 lakhs* with attractive interest rates starting from 13% per annum* and flexible tenures of up to 60 months*. Check your eligibility and apply online today!
* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us
Micro loans offer smaller amounts with shorter tenures, while personal loans provide larger amounts with longer repayment periods.
Micro loans typically offer up to INR 3 lakhs, though the exact amount depends on the lender’s policies and borrower eligibility.
Yes, micro loans often have higher interest rates due to shorter repayment tenures and increased lending risk.
Yes, personal loans are versatile and can be used for higher education, medical bills, home repairs, debt consolidation, and other financial needs.
Personal loans offer longer tenures of 12 to 60 months*, while micro loans typically have repayment periods of a few months to three years.
Small loans generally refer to a type of personal loan, ideal for securing quick access to funds in times of emergencies.
Compare loan amounts, interest rates, tenures, eligibility criteria, fees and charges (such as processing fees), and collateral requirements to find the best option for your needs.
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