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Is it Wise to Take Out a Personal Loan to Fund Your Business?

FAQ354 views

Highlights

  • Looking for a loan to fund your business? You have two options - personal loan and business loan - by which you can do so
  • Read this post showing the details of two loans and decide which is good for you

While new businesses need funds to get off the ground, existing ones require money to expand further. However, businesses come with a risk of unknown for lenders who fund them. Given the uncertainties around, businesses can face several market issues and thus fail to return the money to the lenders. The perceptible risk forces lenders to ask for the collateral while disbursing business loans, making it a secured loan. From the point of view of borrowers, business loans can come with a lower rate of interest compared to unsecured loans. You may feel great hearing lower interest rates. But not many have the collateral to submit and get the loan. For them, a personal loan can just be the option. Read on to know how a personal loan can help one take their business to greater heights.. 

Let’s Check Out the Utility of Personal Loans Here

Personal loans are useful to your business as a result of the following factors. 

High Loan Eligibility

Lenders have started financing beyond INR 15 lakh, which used to be the maximum limit in the case of personal loans before. This will help you get more funds for your business. It will be better to check the lenders that offer maximum personal loan. Take a look.

Lenders That Offer Maximum Personal Loan to Applicants

Customized Interest Rates

Lenders have started offering customized interest rates to survive amidst the intense competition that exists in the personal loan segment. And that’s why the rates have come down to as low as 10.35% per annum. The lower rates mean the reduction of interest repayments over time. Let’s check out the lenders that offer the best interest rates on your personal loans.

LendersInterest Rates (In Per Annum)
SBI9.60% - 13.60%
HDFC Bank10.75% - 21.30%
ICICI Bank10.75% - 17.50%
Bajaj Finserv10.99% - 16.00%
Kotak Mahindra Bank10.75% - 17.99%
Tata Capital10.99% - 18.00%
Bank of Baroda10.10% - 15.20%

Flexible Repayment Options

You can get a personal loan for a tenure ranging from 1 to 5 years. But a few lenders can exceed the maximum tenure by a year to help adjust the Equated Monthly Installment (EMI) to your budget. 

Instant Application 

You can apply for the loan instantly as all these lenders that you see above allow you to apply online. Just visit the official website of the lender, mention your personal and professional details and submit your application online. All this just takes a few minutes of yours.

Simple Documentation

The documentation is simple as you just need to provide the documents supporting your identity, residence and income. While submitting the application online, you can send the scanned documents and be ready with the hardcopies for the executive to pick from you. Check out here the documents you need to submit.

Identity Proof – PAN Card/Voter ID/Driving License/Passport/Aadhaar card

Residence Proof – Voter ID/Driving License/Passport/Aadhaar Card/Electricity Bill/Telephone Bill

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Income Proof – Salary Slips for the Last 3 Months, Last 6 Months’ Bank Statements Latest Form 16 & Income Tax Return (ITR)

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Quick Loan Disbursal

As lenders don’t ask for the collateral, you can get the loan instantly in your account as soon as the KYC formalities are completed. The formalities don’t take much of a time, so you can expect the loan to be disbursed in 3-4 working days. 

But is a Personal Loan the Right Option for All Looking to Get Funds for Business?

The question is an important one given the uncertainty that prevails in the business world. As the loan interest rates are comparatively higher, the interest repayments can be much more compared to a secured loan. In case the business receives a lukewarm response due to a poor market environment, individuals might find it hard to service high interest payments. This is where a secured business loan can be slightly better. As the loan comes with a collateral, the interest rate can be lesser than a personal loan. 

Lenders Where You Can Think of Applying for a Business Loan

LendersInterest Rate (In Per Annum)Loan AmountProcessing Fee & Documentation ChargesTenure
SBI9.05% - 16.30%Less Than INR 25 Lakh, upto 90% of the value of the collateralINR 7,5001-5 Years
HDFC Bank11.90% - 21.35%Upto INR 40 Lakh, INR 50 Lakh at specific locations, without any collateralUpto 2.50% of the loan amount, subject to a maximum of INR 88,500Upto 4 Years
ICICI BankCustomizedUpto 95% Upto 2% of the loan amountUpto 5 Years
Tata Capital19.00% OnwardsUpto INR 75 LakhUpto 2.75% of the loan amountUpto 3 Years
Aditya BirlaStarting from 14.00%Upto INR 75 LakhUpto 2% of the loan amountUpto 3 Years
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How Do Business Loans Work?

Business loans are disbursed as a dropline overdraft facility, wherein the interest is charged only on the utilized amount. A separate current account is designed and provided to the borrowers for the said loan. The documentation here will differ a bit from a personal loan. For the loan to be sanctioned, it is imperative you provide a current account statement for the last 6 months along with a profit & loss account and balance sheet for the last 3 years to substantiate your income proof. Additionally, you need to submit identity and address proofs of the business establishment as well.

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Personal Loan Interest Rates November 2020
Fullerton India14.00% - 24.00%
HDFC Bank10.75% - 21.45%
ICICI Bank10.75% - 17.50%
IndusInd Bank11.00% - 23.00%
Kotak Bank10.99% - 20.99%
RBL17.50% - 26.00%
Standard Chartered Bank11.00% - 15.00%
Tata Capital10.99% - 19.75%
Home Loan Interest Rates November 2020
Axis Bank7.75% - 8.55%
Bank of Baroda6.85% - 8.25%
Citibank7.13% - 8.03%
HDFC6.90% - 7.65%
ICICI Bank6.90% - 8.05%
Indiabulls Housing Finance Limited8.99%
Kotak Bank6.75% - 8.45%
LIC Housing6.90% - 7.90%
Piramal Capital & Housing Finance9.65%
PNB Housing Finance7.50% - 9.20%
Reliance Home Finance8.75% - 14.00%
State Bank of India/SBI6.95% - 7.60%
Tata Capital7.50% - 8.75%