Neha and Rajat were friends for almost a decade now. They both always wanted to become entrepreneurs. And finally, at the very young age of 22, they planned to start something of their own. Finance was of-course an issue for them, so they thought of taking a loan. They were confused if to take a personal loan or a business loan? And made a decision to go through both the proposal and then finalize that which one would suit the best. With various discussions they had with banks and the NBFCs or the financial advisors, they finally took a decision of taking a personal loan. Read below to know the reasons why.
Interest Rate: The first and the foremost reason which is taken into consideration is the personal loan interest rate. They are way cheaper compared to business loan interest rates. The interest rate offered for these loan as compared to the business loan is cheaper by 3% or more. So, definitely, it is a better deal.
Paperwork: While applying for a personal loan, the papers that are required are normal, PAN card, Adhaar Card, Income tax returns papers (Which may not be required always as PAN would have all the details) and photographs. While applying for a business loan, with the identity proof papers, banks would need the proper business plan set on papers. The pros and the cons if it works or otherwise. The future planning and the rough estimate of how much would the business earn if stuck to the proposed plan would also be required. And hence it is too much of work to deal with.
Processing speed: Personal loan nowadays is as instant as a click of the button. It takes hardly a few hours to get your loan sanctioned. Where in, it takes days, weeks or even months to get a particular business loan approved. In a personal loan, one must just tell the reason why they require a loan and it is sorted, but a business loan as mentioned in an earlier point, would require proper paperwork and only then it can be processed.
Credit Score: There are chances of getting a personal loan even at an average credit score. But when it comes to a business loan, the credit score and credit history is checked thoroughly. It becomes even more complicated when there are two partners just like the example mentioned above. If one of the partners has a bad credit score, there are high chances of loan getting rejected. But, the one with a good score can still apply for that personal loan. This does not imply that one should not work towards the credit score. If the score is anything below 750 or 700, one should try to improve credit score. It has to make sure that all the previous missed payments or delayed payments are cleared. A new responsible record is maintained. And within a few weeks, the credit score will start improving and reaching a 700 level.
Loan amount: For a very small start-up, the fundings that are required are of a basic level and not extreme. Even though a business loan has no such standard requirement of the amount that is to be sanctioned, the processing fees and other hidden charges are costly compared to normal personal loan.
With taking all these points into consideration, it is advisable to get a personal one compared to a business loan in terms of interest rate, paperwork, processing speed, credit scores and the loan amount. These all things would combine take an individual to the same conclusion. But always remember, nothing is concrete.
Visit Our Credit Sudhaar Facebook Page.
|