There are usually specific loans for specific functions such as a business loan is usually taken to start a business or fulfill any business functions. However, many loans do not have any particular function, such as a personal loan, that can be used for any job.
What is a Personal Loan:
Personal loan have become very common among consumers. Simply put, it is an unsecured loan taken by an individual to fulfill certain needs. It can be for any purpose, provided it is completely legal. They are a way in which one can fulfill your dream. You can avail of a personal loan to pay for certain medical expenses or a wedding. You can also avail of it to start a business or to buy a car or renovate your home or buy a house.
Personal loans also provide a good interest rate. There are many banks and many non-banking financial companies that provide an affordable interest rate. For example, Indiabulls personal loan interest rate is very affordable for anyone. The interest rate provided by them is only 13.99 percent.
A personal loan falls under the category of an unsecured loan. This means that to take a personal loan one does not have to set aside an asset against the loan. Therefore, the borrower of the loan does not have to provide the lender with collateral that can be auctioned off, in case of a default.
Defaulting on a personal loan is not wise, as it can add up to one’s credit score, which can pose a threat when one applies for another loan or a credit card. The documents required for a personal loan are precise and the process does not take a lot of time.
What is a Business Loan:
A business loan, on the other hand, is a specific loan that can only be used to either start a business or improve one’s business in any way. Unlike a personal loan, a business loan cannot be used for any purpose, but only for business. It requires a lot of documents regarding one’s business and has a thorough procedure.
There are many different types of business loans, such as bank loans, mezzanine financing, asset-based financing, invoice financing, business cash advances, micro-loans, and cash flow loans.
Secured and Unsecured Business Loans:
Business loans can either be secured or unsecured. With a secured loan, the borrower pledges for an asset which can be anything from a piece of equipment, stock, or vehicles against the loan. If the loan is not repaid, the lender will be able to claim ownership of the asset. Unsecured loans, on the other hand, don’t need collateral, although the lender can make a general claim of an asset in case of default. If the borrower becomes bankrupt, unsecured creditors will have the power to realize a smaller proportion of their claims than secured creditors. Furthermore, secured loans will generally attract a lower rate of interest.
Conclusion:
When it comes to choosing between a business loan and the personal loan, the decision is very simple. A personal loan can be availed for any reason from paying for certain expenses that otherwise cannot be paid for. They are less complicated than business loans. They can even be used for purchasing a car or renovating one’s house. In other words, we can say that a personal loan should be applied for by any common man.
A business loan should be only applied for by someone looking to start a business or improve one’s business. It happens to be more complicated than a personal loan and if it is availed of, it should be done after careful consideration.
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