Low income earning individuals have to face lot of hardships to meet the demand for day to day money requirement especially when they are the single breadwinner in the family.
Most common options for low salaried to meet emergency fund
They have two options – either use own source of income or ask other sources – relatives, friends, financial institutions and others. Using personal income is the best recommended option as you won’t owe anyone. But it is not possible for everyone to raise money at the time of need especially when emergency strikes e.g. medical emergency which often needs huge amount of money.
And at such difficult times, asking your friends or relatives is the best alternative, when own source of income does not help. However everyone has their own limitations. So that’s when commercial financial institutions come to the rescue as they offer personal loan but at a cost i.e. interest rate. But the fight doesn’t end there because low income earners fail to meet the income requirement to get personal loan; as most of the commercial banks have high income eligibility criteria. Although commercial banks also offer loans to low salaried but their terms and documentation process are very tedious.
Other alternative to commercial banks are the co-operative banks (scheduled and non-scheduled). Individuals with low income can get small personal loan from co-operative banks much easily compared to commercial banks which includes public sector and private sector such as SBI, ICICI, Axis, HDFC bank & others. Even though many scheduled co-operative banks mandates applicant to be the member of the bank. But this should not be a problem for such individuals, as loan approval process is simple.
Here is the table with list of co-operative banks along with income requirement, loan amount, and interest rate. Few banks provide small loan amount which normally does not require higher salary. So interested individuals should try applying at these banks.
|Name of Co-operative bank||Maximum Loan Amount||Interest Rate (%)||Monthly income required|
|Greater Bombay Co-operative Bank||2 Lacs||14.5||10000|
|Abhyudaya Co-operative Bank||5 Lacs||13.5||8000|
|Punjab & Maharashtra Co-operative Bank||5 Lacs||16||18000|
|Janakalyan Sahakari Bank||5 Lacs||16||7500|
|Thane Bharat Sahakari Bank||5 Lacs||14||8000|
|TJSB Sahakari Bank||5 Lacs||NA||15000|
|Sardar Bhiladwala Pardi Peoples Coop Bank||25000||12.5||NA|
|Janata Sahakari Bank||3 Lacs||14||Based on latest income proof|
|Bharat Co-operative Bank (Mumbai)||2 Lacs||13||Fair income required|
|Bharati Sahakari Bank||5 Lacs||13||2 years of minimum employment|
|Citizencredit Co-operative Bank||1 Lac+||13.25||Salary slips required|
|New India Co-operative Bank||Upto 50,000||On reducing balance method||Minimum taxable
income of Rs100,000/- for last 2 years
|New India Co-operative Bank||Above 50,000||On reducing balance method||Minimum taxable
income of Rs. 150,000/- for last 2 years
The reasons low income earning person should apply for personal loan at cooperative banks are as follows:
- Approval process is simpler
- As loan amount provided is small the eligibility criteria is not very strict
- Interest is normally low compared to commercial banks
- Income requirement is low
- Not very complicated terms and conditions and hidden charges
- Not all banks report or request CIBIL data
- Very small processing or prepayment fees
- Even if you had poor or no credit history, your chances of loan approval are high compared to commercial banks as they mainly judge loan eligibility on previous credit history.
What are the other choices available apart from commercial and cooperative banks?
Low income earners can get personal loan from following alternatives:
- Peer to peer lenders
- Secured loans against FD/LIC policy/gold/property
- Private money lenders