Difference Between Personal Loan and Business Loan


Whether you want to start a new business or keep the existing business run smoothly, you will need a considerable amount of cash. In reality, it may not be possible for all the business owners to invest the money from their pocket. This is the reason why business owners seek other financing sources such as banks and lenders to get money in the form of loans. Nowadays, applying for a loan has become much easier. You can apply here to get an attractive loan for your business online. For an entrepreneur, it is important to think about the source of money to have a business jump start. Entrepreneurs can visit www.entrepreneur.com to get more ideas on entrepreneurship.

Nowadays banks and lenders are ready to offer a wide range of loans to the qualified individuals. For business owners, business loans can be highly helpful. As the name says everything, business loans are offered for running a business. For example, you can get business loans to buy computers and other office supplies. The banks offer business loan by looking into your business history and current finances. You have better chance of getting the loan, if your business has good financial stability. The interest rate may vary from bank to bank. The qualification criteria too may vary with different banks.

Personal loans are offered for the personal matters. The obtained through personal loans could be used for any legal purpose and the bank will not ask you any question. This is not possible with business loans, as the lender will ensure that the money is utilized only for business operation. The advantage with personal loan is that you can also use the money for your business needs and other personal needs, thereby giving you plenty of flexibility to tackle the cash crunch. In most cases, the lender does not ask for collateral.

On the downside, personal loan can give access to cash in relatively small amounts. The lender would also check your credit rating. So, you have less chance of getting personal loan, if you do not have good credit score.

For an entrepreneur, who does not have any business history or experience will find it hard to get qualified for the business loans. In such case, personal loans could be a great boon. Personal loan comes with closing cost. For example, if you want to get a personal loan of $5000, then you will be charged with a closing fee of $250. Therefore, you will receive the loan of $4,750, but will be charged interest for $5000. So, don’t be shocked or surprised, if you are asked to pay closing fees.

If you are very new to business and finding it difficult to get qualified for a business loan, then personal loan could be a great option. There are many websites, where you can find details for loan products. There are agents and consultants, who are ready to provide great help in this regard. Keep in mind that loan should be repaid with interest on time. Failing to pay on time will affect your credit score, which is hard to rectify. So, it is better to avoid getting loan, if you suspect difficulties in repayment.

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