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Our Top Picks for the Best Personal Loans for Low-Income Individuals in India
This guide highlights the best loan offerings to individuals in India that earn relatively low salaries. In order to compare and analyse these best personal loans, we conducted a comprehensive review of all of the personal loans available in India. We then focused our comparison on the interest rates, processing fees and features of loans available to individuals that earn Rs. 10,000 or less each month. As you review these loans, we recommend that you consider the total cost of borrowing as well as the monthly payment requirement for each loan before you apply.
Best Personal Loan for Low-Income Earners: IOB Personal Loan
The Indian Overseas Bank's (IOB) personal loan is one of the cheapest personal loans available to individuals that earn relatively low incomes. This is due to the bank charging a lower than average floating interest rate of 11.80% and processing fee of 0.50%. IOB also has one of the lowest minimum income requirements of just Rs. 5,000 per month.
It is worth noting that the bank charges even lower interest rates to women (0.5% lower) and borrowers that are able to provide 100% collateral security (1% lower). However, IOB is not the best option for individuals that seek large loan amounts, as it only offers loans as large as Rs. 5 lakh. Still, prospective borrowers with relatively low salaries are likely to find very affordable rates for smaller loans through IOB.
|Duration (Years)||Processing Fee||Effective Interest Rate||EMI||Total Cost|
|1||0.50%||10.80%||₹ 10,821||₹ 1,54,857|
|2||0.50%||10.80%||₹ 10,821||₹ 2,84,714|
|3||0.50%||10.80%||₹ 10,821||₹ 4,14,571|
|4||0.50%||10.80%||₹ 10,821||₹ 5,44,428|
|5||0.50%||10.80%||₹ 10,821||₹ 6,74,285|
Best Large Personal Loan for Low-Income Individuals: Citibank Personal Loan
Citibank's personal loans are great options for low-income individuals that seek large amounts of financing. The bank offers the largest personal loans to individuals that earn Rs. 10,000 or less in India, providing financing ranging from Rs. 25,000 to Rs. 30 lakh. This can be particularly helpful for borrowers that face large expenses. While Citibank offers the largest loan amounts, the bank's rates are not always the most competitive for lower income borrowers. For example, the bank charges borrowers 9.99% to 16.49% depending on the size of the loan.
|Duration (Months)||Processing Fee||Effective Interest Rate||EMI||Total Cost|
Honorable Mention: UCO & Union Bank
While we believe the loans above represent the best loans available to most prospective, low-income borrowers in India, it is important to note that there are other options that are worth considering. In particular, some banks offer even lower rates to their existing customers. For this reason, individuals that have a banking history with the lenders below should also consider taking a personal loan from their current bank.
Best Small Personal Loan: UCO Bank Shopper Loan
Prospective borrowers that are current customers of UCO bank should consider the UCO Bank Shopper Loan. This loan has the lowest advertised interest rate of any of the loans in India at 8.45% to 10.55%, as well as a processing fee of just 1.00%. For these reasons, the UCO Bank loan can be the cheapest for those individuals that qualify.
One limitation of the UCO Shopper Loan is that it only offers loan principals of up to Rs. 2 lakh. Additionally, individuals that are interested in the Bank Shopper Loan but are not UCO customers will have to wait at least 6 months in order to become eligible, which deter potential borrowers that require financing more quickly.
|Duration (Years)||Processing Fee||Effective Interest Rate||Monthly Payment||Total Cost|
Best Personal Loan for Self-Employed Individuals: Tata Capital
With Tata Capital's monthly income requirement of Rs. 15,000, low income earners who are also self employed can avail a personal loan as easily as a salaried borrower. Even more, you do not need to hold a salary account with Tata Capital to be eligible for a Tata personal loan.
The Tata Capital Personal Loan offers competitive interest rates starting at 10.99% p.a., as well as a long loan term maximum of 6 years. Self employed borrowers are eligible for a loan amount up to Rs. 25 lakhs, which is in the upper limits of personal loan amounts offered by most other banks. Therefore, if you are a self-employed borrower seeking the benefits of a personal loan that are generally saved for salaried employees, Tata Capital is a lender you should consider.
|Duration (Years)||Processing Fee||Effective Interest Rate||Monthly Payment||Total Cost|
How to Choose a Personal Loan
Personal loans can be helpful for individuals that need a significant amount of financing for a purpose that is not covered by specific-use loans, such as home or car loans. Additionally, many personal loans provide borrowers with funds within a few days, which can help those that need cash quickly.
Before you choose to research and apply for a personal loan, it is important to compare all of your borrowing options. For example, while personal loans typically much cheaper than credit cards in terms of annual interest rates, they are generally more expensive compared to other types of loans such as home, student or car loans. If your purpose falls under one of these categories, a personal loan is likely not the best fit for your needs.
However, if a personal loan is the best option for you, it is important for you to compare loans before applying. Factors that you should consider include your eligibility, the loan amount, loan duration, interest rates and processing fees. For example, you will need to make sure that you apply for a loan that is willing to lend to you based on your financial and employment circumstances. You should also look for a lender that offers loans with tenures and amounts that fit your needs. Finally, you will want to compare the cost of borrowing for each loan that you are considering. It is important to consider both the monthly repayment amount as well as the total cost of borrowing when determining the financial burden of a loan.`
Am I Eligible for a Personal Loan?
You may be wondering if you are even eligible for a personal loan given your income level. As you begin to compare loans you should make sure that you meet each bank's eligibility requirements. After income level, most banks will also consider your credit history and employment situation. Luckily, there are a number of loans available to individuals based on different financial circumstances. For example, some lenders offer loans and interest rates specifically for salaried or non-salaried employees. Others offer loans that are specifically tailored to the needs of high or low-income earners.
How to Apply for a Personal Loan
If you choose to apply for a personal loan, you will need to fill out an application form and submit several required documents. For example, banks typically require that applicants submit documents that prove their identity, address and income. It is also common for lenders to ask for a passport-sized photograph. It is also worth mentioning that some lenders are willing to negotiate from their advertised interest rate, which highlights the importance of comparing several lenders and rates before choosing to apply for your personal loan.
Examples Documents Typically Required for Personal Loan Application
|Required Document||Salaried Applicant||Non-Salaried Applicant|
|Proof of Identity||Passport, Drivers License, PAN|
|Proof of Address||Passport, utility bill|
|Proof of Income||Bank statement, Salary account||Audited financials, bank statement|
To find out what personal loan amount you are eligible for, you can use your bank or lender’s eligibility calculator. Your final personal loan amount will be determined by your salary, CIBIL score and EMI/NMI ratio.
The minimum salary required for a personal loan is Rs. 5,000 for select banks. However, many have an income requirement of at least Rs. 10,000 to Rs. 25,000, as well as other requirements like good CIBIL score and credit history.
Your personal loan eligibility is determined by your income, job status, EMI to NMI ratio, CIBIL score, and residence. Additionally, your desired loan amount and loan tenure will affect your final loan amount.
In order to determine the best personal loans for individuals with modest incomes, we initially conducted a comprehensive review of personal loans in India. We researched and analysed more than 80 loans from 35 lenders, which are listed in our table below.
|Lenders Reviewed in ValueChampion's Study|
|Aditya Birla Capital||Axis Bank||Bajaj Finserv||Bank of Baroda|
|Bank of India||Bank of Maharashtra||Canara Bank||Central Bank of India|
|Citibank||Credy||Federal Bank||Fullerton India|
|HDB Financial Services||HDFC Bank||HSBC Bank||ICICI Bank|
|IDBI Bank||IDFC First Bank||InCred||India Infoline|
|Indian Bank||Indian Overseas Bank||IndusInd Bank||Karur Vysya Bank|
|Kotak Mahindra Bank||LoanTap Financial Technologies||RBL Bank||SBI|
|South Indian Bank||Standard Chartered||Tamilnad Mercantile Bank||Tata Capital|
|UCO Bank||Union Bank of India||Vijaya Bank||Yes Bank|
We first gathered cost data from these lenders, including interest rates and processing fees. We then created an algorithm that compares the cost of borrowing for each loan. Our calculations include mandatory processing and administrative fees, interest costs and applicable promotions. We did not include fees for late or early payments, as we assumed that the borrower would make payments on time in order to minimise the total cost of borrowing. Because banks offer loans of various tenures and advertise ranges of interest rates, we calculated borrowing costs based on a variety scenarios in order to make our calculations and develop our list above.