How To Get a Personal Loan If You Have a Low Salary?

Securing a personal loan can be difficult for individuals with low income, as they may not meet the strict income requirements set by traditional lenders such as banks. However, there are still options available for those who fall on the lower end of the income spectrum. Here are some options to consider if you want to apply for personal loan.

Gold Loans 

Gold loans are a type of personal loan that you can obtain by pledging your gold ornaments or bars. These loans are based on the value of the gold pledged rather than the borrower’s income. If you apply for personal loan, you will get 70–80% of the value of the gold pledged. It is crucial to pick reputable establishments with on-site, accredited assessment and valuation facilities. For gold loans, the personal loan interest rate is between 10-14%, and there is a processing fee of 1-2%.

Advantages of gold loans include:

• Income is not a deciding factor for the loan
• A non-liquid asset like gold can be used to obtain a loan
• Flexibility in deciding on the repayment period, making it ideal for short-term needs

Loan against Fixed Deposits  

You can apply for personal loan using your fixed deposit account as collateral. Banks are willing to lend to you against your fixed deposit, as they have the security of your FD to fall back on. In this scenario, lenders will generally not require minimum income criteria. 

The loan amount will typically be around 80-85% of your FD. You will also be charged an interest rate of 1-2% higher than the interest rate on your fixed deposit. The credit score may not be considered for loans against FD as the bank has the security of your fixed deposit.

Advantages of a loan against FD include:

• Lower interest rates than a normal unsecured loan
• No prepayment penalty like in personal loans

Fintech Companies 

Fintech companies are financial institutions that utilize technology to simplify lending and investing. These companies have made it easier for low-income people to apply for personal loan as they would not have been eligible for credit from traditional financial institutions to borrow small sums of money. 

Instead of using conventional factors such as income levels and repayment capacity, they base their lending judgments on their data and algorithms. In addition to credit scores, fintech companies can gather information about social media usage and digital footprints, such as payments for various utilities and online shopping habits.  

Microfinance Loans 

Microfinance loans are designed to serve individuals and households at the lower end of the income spectrum. They are specifically geared towards homemakers looking to start small-scale businesses and the economically weaker. These loans are often structured as joint liability-based group lending. Microfinance loans can also be obtained for as little as Rs 5000.

Non-Banking Finance Companies (NBFCs) 

A significant portion of the credit market comprises Non-Banking Financial Companies (NBFCs), subject to less strict lending rules than banks. They usually do not have minimum income requirements for loans and consider each application individually. When borrowing, cooperative bank clients or members may be given preference.

You can apply for personal loan here since they have low-income requirements. However, the interest rates are typically greater to account for the increased risk. Depending on the loan size, they might additionally need security or collateral. Cooperative banks may have a personal loan interest rate that ranges from 13-20% or more.

NBFCs and Cooperative banks are good options when you do not have a fixed deposit or gold to pledge. 

The advantages of borrowing from a cooperative bank or NBFC include the following:

• No prepayment penalties.
• Less strict income rules
• Membership with cooperative banks can be beneficial in the future

Conclusion

Securing a personal loan can be difficult if you have a low income, but options such as gold loans, NBFCs, fintech companies, and more are available to consider. Each type of loan has its own set of benefits and requirements. It is important to compare and evaluate the options before making a decision.