A loan acts as a backbone for any individual with a financial emergency. It helps them to meet harsh expenses that would otherwise remain a headache. Although business loan sounds more appropriate for a business owner who is in need of urgent finance, a personal loan has its place as a viable option for the same. But before you decide upon going for one or the other, it is crucial to examine your personal need or business requirement in order to check the prospectives of the outcome or consequences. You can also check https://www.sc.com/in/loans/personal-loans/ for personal loans.
It is only through examining and research that you can understand the prospects of business loans. So, here are a few differences that will make you understand which loan you should be opting for and which one isn’t actually your cup of tea.
Benefits and loss: A person can be easily applied and the processing for the same is quite simple and less time-consuming. To avail personal loan, the financing company will check your personal details related to residence, employment period, income as well as credit score, and there is no collateral security required. Hence, any person who is looking for urgent financial assistance can avail of using his or her genuine personal details. There is hardly any downside for a personal loan.
On the other hand, a business loan can be availed by a company’s owner in order to separate business from personal finances. One of the most important uses of a business loan can b made to achieve financial credibility for backing up your business. However, a business loan is hard to get if your company hasn’t built its credit yet. Also, the process through which you can avail business loans can be hectic and lengthy and involves a lot of documentation, submissions, and rejections.
Annual Percentage Rate (APR): Personal loan comes with both fixed interest rate and variable interest rates depending on the lenders.
The amount of interest in the business loan may differ and in some cases, the lenders may charge monthly instead of yearly interest rates.
Terms or durations: If you want to apply for a loan, the duration of repayment is one of the crucial things to note. For a business loan, one can go for short term duration as well as long term duration depending on the amount of interest one can afford to pay back.
For a personal loan, the time-frame varies from 1-7 years where 7 years is the maximum time one will get to repay the debt.
Eligibility: Any individuals who have a good credit score can avail of a personal loan. In addition to that, documentation and proof of monthly income is mandatory.
However, for a business loan, one must be active in terms of business finance rather than personal.
Restrictions on using business loans
There are a few business loans available for specific uses or cases while other types do not possess and restrictions on them. For instance, an equipment loan can only be financed to purchase equipment for a company. Similarly, invoice finance relates to accounting receivable.
Restrictions on using personal loans
A personal loan, on the other hand, can be used for various different purposes, which especially depends on how you will make use of it. Although, it is like a business loan only you can use it for more personal requirements. For instance, personal loans can be borrowed as an educational loan, medical, home decorations and luxurious items.
Having said that, one should always check the details of the lenders in order to avoid any fraudulent activities.