If you are an entrepreneur or just want to invest in your career, travel plans, or education, a loan is a great option for additional funding. However, it is important to know the types of loans available so that you can make an informed decision before you avail yourself of any funds.
We’re here to answer your business loan and personal loan questions so you can get the best loan option on the market.
What are business loans?
The meaning of the term business loan is clear in the name itself. Online business loans are only given for business purposes. They either serve to expand a company’s infrastructure or as start-up capital for self-employment.
Traditional business loans have a lengthy approval process that requires you to provide collateral as well as an overview of your business loan (business plans, account and profit statements, etc.). However, small business lending companies offer unsecured loans of smaller amounts that have shorter payout deadlines and are more flexible.
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Benefits of online business loans
- The terms are flexible.
- Collateral is not required, it can be unsecured.
- Granted at relatively lower interest rates.
- With a company loan, tax advantages can be claimed.
Disadvantages of online business loans
- They may only be used for business purposes. If you want to use the funds on other plans, you would be better off with a personal loan.
- Some business loans must be secured by assets.
- It can be difficult to qualify for a business loan.
What is a personal loan?
A personal loan is a type of unsecured loan that can be availed for any purpose. There is no need to provide collateral for a personal loan and if you are facing a financial crisis this is the perfect option for you. Personal loans are granted on the basis of criteria such as employment history, creditworthiness and income level.
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Benefits of personal loans
- Personal loans are versatile.
- The application and approval process is shorter.
- It’s a great option for emergency funds.
- Both small and large quantities can be used.
- No collateral is required; it is unsecured.
Disadvantages of personal loans
- Interest rates can be higher.
- If EMIs are not paid on time, you will face penalties for late payment.
- Can contribute to an over-spending habit.
Finally
There are both advantages and disadvantages of each type when choosing your loan. You should choose a corporate loan if you are expanding an existing business or need larger start-up capital. Business loans are also perfect for entrepreneurs seeking tax exemptions and deductions.
However, these days the lines are not that clear. For example, if you’re trying to monetize a personal hobby like baking, you may not qualify for a traditional business loan, but a personal loan or an online small business loan is a better option.
When choosing your loan, compare lenders, interest rates, terms, etc. before availing yourself of your preferred funds. It is also important to understand that the best type of loan is the one that suits your needs and is successful.
