Personal loan vs. business loan- which is the right option for you?

India is one of the breeding grounds for emerging small businesses. Indians are passionate to build something out if their idea rather than following the masses. That’s where India holds the third position in small business segment. This young energetic passion has developed a pool of personal and business loan lenders.

As a budding entrepreneur, you may get confused in choosing the loan type for your business funding. The features of both personal loan and the business loan may look the same but is it? Both are very different and can bring in different impact if chosen. Before you apply for business loan find out the features of both personal loan and business loan for your small business setup and choose wisely.

Personal loan vs. business loan

Quick and easy approval: Personal loan approval needs a good credit score and good income. If the credit score is below the mark, then the collateral loan can be a way out. Whereas, if you see a business loan needs an excellent credit score. The business has to show its revenue turnover and stability in the industry.
Interest rates: Personal loan usually comes up with a very huge interest rate. It is generally used for purposes like weddings, medical emergencies, and emergency cash. If you are considering a Personal loan for your business you need to consider the huge interest rate along with it. Even if your business is not giving revenue you will have to pay the high-interest amount monthly. That’s when the business loan is considered an ideal choice.
Shorter tenure: A Personal loan always comes up with a short tenure while a business loan has a long tenure. If as an entrepreneur you take up a personal loan for your business you may end up with a short tenure loan. Short tenure means finishing off the loan amount by paying heavy installments. Thus, a business loan with a long tenure can be more applicable.
Fund application: If one takes a personal loan for business purposes, he may end up spending it for s personal emergency as personal loans can be flexibly used. This may lead to a burden of debt without productivity in business. On the other hand, if you take a business loan you can only use it for your business purpose.
Loan amount: In Personal loans, the fund amount is always limited. You cannot expect a very good amount other than exceptions. So, if you are opting for a personal loan for your business then you might end up having less than expected. A business loan always comes up with a huge amount of fund approval as a lot of investment is associated with it. A business loan can help you invest in the right places without a shortage of funds.

Conclusion:

Studying all the features, you must have made up your mind and taken a decision. Well, if you are still confused then the right decision would be a business loan for your business. Before you apply for business loan, shop around to find the best deal.