Decoding the difference between Personal Loan and Business Loan Read to know more about the differences between the two types of loans
Owing to the ever-changing landscape of the world we live in, it is imperative to constantly be agile and adjust to our professional or personal goals. Motivation and zeal to achieve the goal are crucial; however, another pertinent element of the successful completion of the goal is its financial aspect. Be it a planned wedding, simply the need for a large sum of money towards a medical emergency, or an interesting opportunity to expand your business idea to newer markets or grow your business natively - our goals are dependent on the funds we have at our disposal. There are two ways by which you can fund your goals. Firstly, saving/investing your money in the hope of getting better returns in the future. However, this is often a time-consuming process and can be mentally exhausting. Secondly, you could apply for a loan from a financial institution to fulfil such goals.There are a lot of stigmas attached to taking a loan; however, if you can rid yourself of this feeling, loans can prove to be one of the most financially liberating tools made available to a borrower by a financial institution. While taking a loan is indeed a quick solution for immediate capital requirements, getting the right one depending on your needs, is the real trick to solving your capital problems. While asset-specific loans are available, like a home loan, gold loan, loan against property or vehicle loan, there are certain loans which do not require you to pledge your assets with the lender. These are called unsecured loans, and examples of the same include Personal Loan and Business Loan. Let’s check out two scenarios to understand the difference between a Personal Loan and a Business Loan.
Under what circumstances is a Personal Loan better for you?
There are a lot of benefits to opting for a Personal Loan. The loan process is quick, involves less documentation and needs no collateral to be pledged with the lender. But should you go for it every time you need funds? The answer to that question depends on your needs and priorities. If you need instant funds and have charted a plan on how you will repay the instalments, then you can go for a Personal Loan. But when it comes to using loans for business purposes, it is not ideal and should be avoided. Tagged as an unsecured loan, a Personal Loan does not require any collateral to get the loan. But there are a few aspects of Personal Loans which you should keep in mind:
Given that the loan is collateral-free, the interest rates are higher as compared to a secured loan, like Home Loan, Gold Loan, or Vehicle Loan;If you are planning to take a Personal Loan for business operations, then you must keep in mind that the loan amount of a Personal Loan is comparatively less as compared to a Business Loan;To qualify as an eligible borrower for a Personal Loan, you need to have a healthy CIBIL credit score, ideally 700 or above.
There are many lending institutions out there in the market offering Personal Loans; Poonawalla Fincorp Ltd is one of the trusted lenders. The company offers end-to-end digital loan solutions and has a robust channel for customer service which helps you in every step of the loan application process and servicing of the loan. Right from planning for the loan to offering an intuitive free online EMI calculator tool on its website, to easy paperless loan applications to quick disbursals. The company even offers easy repayment options. Some of the other salient features of a Personal Loan from Poonawalla Fincorp are:
No collateral/securityFlexible repayment tenureAttractive interest ratesMinimal documentationMulti-purpose, high loan amount with no restrictions on usageZero foreclosure/pre-payment chargesNo hidden chargesQuick approvalsEasy and hassle-free process
Under what circumstances is a Business Loan better for you?
Unlike Personal Loans, Business Loans are designed and structured differently. As the name suggests, a Business Loan is meant solely to be used for business purposes. Being an unsecured loan, a Business Loan can be used for activities ranging from expanding your existing business to newer markets, improving the infrastructure of your current operations, hiring new talent, or catering to any aspect of running a business that needs funds.
Due to the high competition prevalent for this product, the process of obtaining a Business Loan has been simplified by most lenders. To opt for a Business Loan, the documentation required is mostly related to personal and business-related aspects, and the money disbursed is to be spent on business-related activities. But if you plan it better, you can utilise the loan to your advantage. Some of the major advantages of taking a Business Loan are as follows:
You can raise funds for various business-related activities without diluting stakes to investors or shareholders.Another compelling reason to opt for a Business Loan is that the borrower can avail of tax benefits to an extent.
Offering one of the best services when it comes to providing Business Loan, Poonawalla Fincorp can help you empower your business and drive you to help it reach new heights of success. Catering to business owners, Poonawalla Fincorp offers loans to MSMEs that are tailored to meet the various needs of a business, such as working capital, business expansion requirements, purchasing inventory, consolidating existing high-interest rate loans, etc. Another interesting point to consider here is that depending upon your loan application, Poonawalla Fincorp offers unsecured Business Loans, unlike many other Non-Banking Financial Companies that require borrowers to pledge physical assets as security with the lender. Some of the top features that help Poonawalla Fincorp’s Business Loan to stand apart are:
Collateral FreeMinimal documentationFree online EMI calculator tool to check your EMI amountSwift and smooth online disbursalCompetitive interest rateSizable sanction up to ₹50 LakhHassle-free, online application processFlexible tenure of up to 36 months
As the nature of both the types of loans mentioned above is different from each other, it is ideal for you to introspect and check your needs accordingly before applying for a loan. If a Personal Loan can help you fulfil your immediate financial needs, then you can opt for it, but if you have a plan in place for your business, then you must opt for a Business Loan. With amazing offers for both a business owner and an individual, you can check what Poonawalla Fincorp Limited has in store for you.
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(This article is generated and published by ET Spotlight team. You can get in touch with them on [email protected])
This story originally appeared on: India Times - Author:Faqs of Insurances
