When you’re looking for money for a startup, a business loan might sound like the best solution. However, personal loans are still a worthwhile choice. Like any business preference, there are advantages and disadvantages to both approaches. It’s crucial to keep in mind your personal and professional needs. Additionally, look properly at the probable outcomes and consequences before moving forward.
You may be a businessman looking to grow your enterprise. You may also be an individual in need of capital to purchase equipment for your start-up. It matters most to comprehend the most effective means of funding your startup’s operational needs. Although a business loan is the first option that will likely immediately come to mind when starting a business, many businessmen believe that a personal loan may also be a better alternative.
How do Business People Get Help with Loans for Small Businesses?
Small business loans give a business the money it needs. A loan could be used to pay for the purchase of machinery, payroll, advertising, or cutting-edge technology. There are plenty of loan alternatives accessible due to the huge range of demands.
Business loans come in both short- and long-term varieties. However, in the case of business loans, you might have to provide a lot of documentation regarding your business. These may be budgetary projections and records. These will probably still be based on your credit record and can be either with or without collateral.
How Can Personal Loans Help Any Business?
A business loan is more complicated than a personal loan for business-related purposes. Your salary and credit history, among other personal financial details, will be checked when applying for a personal loan. Since most loans are unsecured, collateral is not required.
However, there is a significant drawback to using a personal loan to cover business costs. If your company is unable to repay the loan, you will be held personally responsible for the remaining sum.
Personal loans are classified as unsecured loans since they are generally not secured by security. The applicant’s earnings and credibility determine the loan’s parameters, which include the size, interest rate, and repayment terms. Repayment will be payable in equal instalments over a set period, plus interest and any other costs.
It is possible to use a personal loan to fund business-related expenses. Because the loan amount is transferred into your personal account, you are free to use the money for whatever needs arise. However, loan repayment continues to be a personal duty, separate from the business’s responsibilities.
Which Loan Should You Take Out: Personal or Business?
The Decision Makes Sense to Get a Personal Loan if
- Your company isn’t yet able to take out loans on its own.
- To demonstrate that your company qualifies for a loan, you lack a business credit history or rating.
- You require money for both personal and professional purposes. Collateral is not something you should offer as security for a loan.
- You require money immediately, as in the next several days.
A Business Loan Seems Reasonable if
- You aim to establish and preserve credit for your company.
- You have to take out a large loan.
- The best possible interest rate is what you expect.
- More loan alternatives and extended terms of repayment can be advantageous to you.
- Since the funding may take some time to be deposited into your bank account, you have the funds to await it patiently.
Check the Most Easily Accessible Business Loans and Personal Loans in 2024
| Loan Type | Provider | Min. Criteria | Loan Size | Tenure | Interest Rate Range | CIBIL Score Required | Processing Fee |
| Business Loan | Poonawala Finance | No minimum criteria | ₹1.00L – ₹10.00L | 12M – 36M | 16% – 20% | 700 or above | 1% – 2% |
| InCred | No minimum criteria | ₹50.00k – ₹10.00L | 12M – 60M | 16% – 33% | 650 or above | 2% – 5% | |
| Flexi | ₹20.00L | ₹1.00L – ₹25.00L | 12M – 36M | 18% – 30% | 700 or above | 3% – 4% | |
| Yes Bank | ₹1.00cr | ₹5.00L – ₹50.00L | 12M – 36M | 16.5% – 19.5% | 650 or above | 2.5% – 4% | |
| HDFC Bank | ₹1.00cr | ₹1.00L – ₹75.00L | 12M – 48M | 16% – 18% | 700 or above | 1% – 2% | |
| Personal Loan | Hero Fincorp | ₹15.00k | ₹50.00k – ₹10.00L | 12M – 60M | 9.5% – 16% | 700 or above | 1% – 5% |
| Cash Out | ₹12.00k | ₹10.00k – ₹4.00L | 4M – 4M | 1.5% – 3% | 550 or above | 1.5% – 2% | |
| Stashfin | ₹20.00k | ₹5.00k – ₹5.00L | 9M – 36M | 2.45% – 4% | 725 or above | 2% – 2% | |
| KreditBee | ₹16.00k | ₹1.00k – ₹3.00L | 1D – 4M | 1.5% – 3% | 550 or above | 5% – 6% | |
| FlexSalary | ₹8.00k | ₹4.00k – ₹2.00L | 6M – 60M | 1.5% – 3% | 550 or above | ₹300 – ₹750 |
Pros and Cons of Taking Out a Business Loan
| Pros | Cons |
|
|
Pros and Cons of Taking Out a Personal Loan
| Pros | Cons |
On the other hand, business loan providers will probably look over your business and personal credit histories. They can ask for your business proposal, along with several different financial records and statements from your company. This can take a lot of time.
|
|
The Facts that Affect Your Monthly EMI
The quantity and number of EMIs may vary, depending on tenure, present market rates, and other considerations.
The following are the main variables that can affect both the size of your loan and the interest rate:
- Fixed or Variable Interest Rates for Loans
Your monthly instalment amount is mostly dependent on the type of interest you pay for the loan you received. Monthly instalment payments for a loan with a set rate of interest remain the same for the entire term of the loan. On the other hand, loans with variable rates have an interest rate that changes based on market rates.
- Partial Payment or Pre-closure
It is an additional factor influencing your EMI payments. Each time you make a partial payment against the loan, the remaining principal amount is lowered, decreasing the total amount of interest payable.
When you decide to make a partial payment, you generally have the choice to maintain the same tenure or EMI amount. Maintaining the same EMI will result in a shorter loan term. Similarly, if the term remains the same, the monthly instalment responsibility will decrease.
It is undoubtedly true that manually figuring out your monthly EMI is complicated. However, an online EMI calculator can help you easily determine the monthly instalment amount. Thus, you save many hours, making the process easy and convenient.
Choose the Perfect Match: Personal versus Business Loans
Looking for loans is similar to choosing the appropriate instrument for the duty at hand. Personal loans can be used for a variety of needs, including supporting education, debt repayment, emergency medical expenses, and much more.
A company loan, however, is like a rocket boost for your entrepreneurial aspirations. It functions similarly to extra support being given to the system to pay for numerous necessary operations. It exists to support a business’s growth and improvement. Additionally, it helps it reach its goals by purchasing fresh technology and machinery.
Therefore, it is important to look at the reason why you will require the funding. If it’s personal, taking out a personal loan makes sense. A business loan is the best option if growing and improving the business is the goal. Finding the ideal fit for what you desire is what matters most in your final decision.
How to Apply For a Business Loan?
- Open https://referloan.in/.
- Navigate to the “loan” option.
- Select the “Business Loan” Option.
- Select a lender that looks best suited to your needs.
- If you’re an existing client, fill up the given form. New people must first register before submitting their application form.
- Enter all of the information along with the mobile phone or email ID for OTP authentication.
- Bring in your earnings and KYC information.
- Choose your loan size.
- Attach all relevant documents.
- Send your application form.
- Wait for a response from Refer Loan’s Team.
How to Apply for a Personal Loan?
- Go to https://referloan.in/loans/personal-loan
- Select a lender that best fits your needs.
- Enter your personal information to check whether you’re eligible for loans in just a few minutes.
- Choose the swift loan offering and payback plan that best suits your preferences.
- Attach all relevant papers digitally in PDF format.
- Following approval, receive the requested money directly into your bank account within 5–6 working days.
- Please remember that the documentation provided above is officially authorized when you submit your loan request.
Calculate your payback amount in advance before taking out any loan. This will help you to be certain that the monthly installments won’t put a strain on your financial health. You may better comprehend how the payback amount is determined by using an EMI calculator. You may then handle your money in the most effective way possible.
Bottom Line
Each type of loan—personal and business—has benefits of its own. The main goal is to manage all financial expenses, avoiding suffering any losses. In comparison to a personal loan, you will have access to more money if you choose a business loan. Hence, go for a business loan, especially if you are running a large setup. For this, you will need additional funds and should go for personal loans if you need limited capital.
As a result, you should evaluate the two loan types in accordance with the demands of your business. After that, make a smart choice based on the loan size, interest rate, and repayment term that you can handle.
It can be difficult to choose the best financial solution for your business. Business credit can be established through business loans. However, they often have larger borrowing ceilings than personal loans.
However, a personal loan allows you to receive the funds you’re seeking more quickly and with greater flexibility. Review the advantages and disadvantages of each loan type to choose the most suitable type for the business’s operations and cash flow requirements.