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Can I Scale Up My Business with a Personal Loan?

FAQ126 views

Highlights

  • Contemplating a business expansion plan via a loan but not sure which of the two - personal loan vs business loan - is better
  • Decide not only based on interest rates but also in terms of accessibility and documentation

The question suggests you are already into business and want to expand it further with a personal loan. Taking your business to the next level requires a proper study of the market, competitors, your status quo such as the flow of income, besides fresh funds. You may require funds at different stages from entering into a new product zone to making deep penetration in the market. So, you should search for a lender that offers you a reasonably higher amount of personal loan at a relatively low rate of interest. It will also be better to have a lender that can give you affordable top-up loans. Come and read about this.

Lenders That Offer Maximum Loan at a Lower Rate of Interest

LendersInterest Rate (In Per Annum)Loan Amount (INR)Processing Fee (In INR)Maximum Repayment Tenure
State Bank of India9.60% - 13.60%Upto 20 Lakh1.50% of the loan amount, subject to a minimum and maximum fee of 1,000 and 15,000, respectivelyUpto 6 Years
HDFC Bank10.75% - 21.30%No Maximum Limit, it will depend on your income, repayment potential and credit scoreNIL-2.50% of the loan amountUpto 5 Years
ICICI Bank10.99% - 18.49%Upto 40 Lakh999-2.25% of the loan amountUpto 5 Years
Bajaj Finserv10.99% - 16.00%Upto 25 LakhUpto 3% of the loan amountUpto 5 Years
Kotak Mahindra Bank10.99% - 20.99%Upto 20 Lakh0.99%-2.50% of the loan amountUpto 5 Years
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Note – The processing fee will also include Goods and Services Tax (GST) of 18%.

Why to Take a Personal Loan When You’ve Other Options too?

The below pointers indicate the viability of personal loans more with regards to expanding your business even as the business loan is available.

Easy Access of Capital – Don’t know how you started your business? Whatever fund issues you might have faced while accessing the capital to kickstart your business, you will not want to face the same when expanding it, right? So, a personal loan without any collateral may just be the driving factor for you to take it and pay over a tenure you choose to do so. Whereas, only a few lenders provide business loans without collateral. Maybe, in terms of interest rates, personal loans can be slightly higher than business loans which are granted against collaterals. But too many formalities that are synonymous with business loans may just swing away your mood from the said option.

Faster Disbursal – The loan disbursal can take around 3-4 working days provided the documentation process goes without any problem. In the case of business loans, the involvement of collateral and the loan valuation based on it can take more time. Plus, you may not get a very extended repayment period.

For example, a business loan secured against fixed deposits of the bank can be given for the time the deposit is there. So, if you have taken a business loan of say INR 5 lakh against an FD of INR 7 lakh booked for 4 years around 2 years back, you’ll be given a maximum of 2 years to repay the loan. This will raise your EMI considerably and make you compromise a lot in your routine to ensure a timely payment. And, if the business does go through a lean patch, the higher EMI amount might just be too much to service on time. Of course, you can extend the loan tenure by making renewals of fixed deposits. But you could see the time getting consumed in this process.

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Seamless Documentation – Documentation is pretty simple in the case of personal loans as you just need to provide simple KYC and income documents. In contrast, business loans will require submitting a full business expansion planner in addition to the KYC and income documents. And not to forget the collateral documents. So, the documentation can take more time in business loans compared to personal loans.

Top-up Personal Loan Rates of Lenders

The name top-up personal loan defines the product in itself. It’s an amount over the existing personal loan amount from the existing lender. This could be handy to your business as a smooth repayment track of the existing personal loan can help you take the top-up amount at a lower rate of interest, helping you expand your business at a good pace. Plus, there won’t be any documentation process involved in it. Let’s check out the best top-up personal loan rates for you to grab.

LendersTop-up Personal Loan Interest Rates (In Per Annum)
SBI11.45%
HDFC BankAround 10.75% - 21.30%
ICICI BankStarts from 11.25%
Kotak Mahindra BankStarts from 10.99%
Bajaj FinservAround 10.99% - 16.00%

Conclusion

As the details are out, you can evaluate and choose the one which fits better to your business expansion plans.

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Personal Loan Interest Rates July 2020
Fullerton India14.00% - 33.00%
HDFC Bank10.75% - 21.45%
ICICI Bank10.99% - 18.49%
IndusInd Bank11.25%
Kotak Bank10.99% - 20.99%
RBL17.50% - 24.00%
Standard Chartered Bank11.50% - 18.00%
Tata Capital10.99% - 18.00%
Home Loan Interest Rates July 2020
Axis Bank7.75% - 8.55%
Bank of Baroda6.85% - 7.85%
Citibank8.20%
HDFC6.95% - 8.00%
ICICI Bank7.45% - 8.55%
Indiabulls Housing Finance Limited8.80% - 11.05%
Kotak Bank7.40% - 9.70%
LIC Housing7.40% - 8.85%
Piramal Capital & Housing Finance9.00% - 9.10%
PNB Housing Finance8.60% - 9.45%
Reliance Home Finance8.75% - 14.00%
State Bank of India/SBI6.95% - 7.60%
Tata Capital9.20% - 9.35%