Should You Apply For a Business Loan Or a Personal Loan?
The need for money is not a new concept. Studying, starting a business, purchasing a home, or even paying off existing loans often requires large sums of cash that a person may not have on-hand. There are many types of loans available, and each one serves a unique purpose and has its own type of payments terms that go along with it.
Knowing which type of loan to take out that fits your needs best is very important when it comes to making sure you get what you need out of it and that you’ll be able to pay it back. Today, we’ll look at two different loans that can be deceivingly similar, and see which one is best for your needs: Personal Loans and Business Loans.
Personal Loans VS Business Loans
When you look closely at these two types of loans, you’ll see that the basic premise of each is the same. Both will give you a certain amount of money with an interest rate and payment terms attached to it. The rate of interest and the amount of time given to pay it back depends on each individual lender; there is no fixed rate and time for personal or business loans as a whole. That being said, there are two main differences between these two types of loans: eligibility requirements and uses of the money.
Requirements
To borrow any loan from any lender requires certain checks into your personal details for the lender to ensure that he or she will get his money back in a prompt manner. Business loan lenders will often look at your business’s credit score, a year’s worth of bank statements showing record of your company’s sales, your company’s time in business, the industry, and the past year’s taxes. For a personal loan, the lender will evaluate the risk of lending you money via your personal income and your own credit history.
Uses for The Loan
Of course, the lender will also want to know why you need their money and what you want to use it for. For a small business loan, you’ll want to have a purpose for the loan money at the ready, whether it be to purchase new equipment (you’ll want to look into Equipment Financing), to pad your payroll for slower months, or to open up a new branch. Personal loans should be used for things not related to business but more to your own personal life such as helping with medical bills, making home improvements, or paying off car payments.
How to Choose
Basically, you’ll want to make a clear separation between business matters and those of your personal life. Once you have an understanding of what type of payment you’ll need the money for, you should have an easier time choosing which type of loan to go for.
Interested in a business loan for your company? Find out more information with Onebox Funding here.
