Points to Keep in Mind Before Taking a Microfinance / Small Loan

• Understand the Loan Purpose: Microfinance loans are designed for income generation, small businesses, or emergency needs. Borrow only for productive and essential purposes to avoid repayment stress.
• Check the Interest Rate Structure: Interest rates may be slightly higher due to unsecured lending. Always ask whether the rate is flat or reducing to avoid confusion in EMIs.
• Assess Your Repayment Capacity: Ensure your daily or monthly income is sufficient to meet regular repayments without affecting basic household expenses.
• Be Aware of Repayment Frequency: Microfinance loans often have weekly or monthly repayment cycles. Choose a schedule that matches your cash flow.
• Verify All Charges: Understand processing fees, insurance charges, and any late payment penalties to avoid unexpected costs later.
• Maintain a Good Repayment Record: Timely repayments help build your credit history and improve eligibility for higher loan amounts in the future.
• Borrow Only What You Need: Avoid over-borrowing, even if eligible for a higher amount. Smaller loans are easier to manage and reduce financial pressure.