Many people think that personal loans are only for personal use, but it is not true. Many people use a personal loan for business and other purposes. The truth is, you can use personal loans for anything you want. It is your own personal choice to use the loan money.
Sometimes using a personal loan for a business can be a good idea other times, it might not be a good idea. It depends on the situation and other options.
Personal Loan for Business:
It is a personal loan that you take for business purposes in Singapore. Mostly new start-ups go with a personal loan as they are not eligible for business loans Singapore. If you have a good credit score, you can easily get a person for a lesser interest rate. You don’t have to worry about qualifying for a business loan when you can easily get a personal loan at an affordable interest rate.
If you are looking for fast personal loans for business, you can get it for a maximum amount of $35,000. Different banks offer different loan limits depending on your credit score and other factors. The loan tenure range from 3 to 5 years. The interest rate can range from 5.99% to 35%. Some banks offer this loan within 24 hours.
How does it Work?
Before taking a personal loan for business purposes, you need to know how it works. If you want to start a new business but don’t have money for it, you can take a personal loan. New businesses mostly don’t qualify when it comes to business loans.
You can take a personal loan from various sources. You can approach a bank. Take a loan from an online lender or go with credit unions. It is a term loan. You have to pay back the loan in monthly installments to cover the principal and interest.
You need to inform the lender that you are using the personal loan for business use. Not all loans can be used for business. You can use these loans for short-term business needs. You can use it for purchasing inventory, paying salary, advertisement, etc.
Pros of Using a Personal Loan for Business:
Easy to Qualify: The biggest advantage of using a personal loan for business is that it is very easy to qualify. You can get approvals easily. The chances of rejection are very low. You don’t have to present various documents or proofs about your business to get this loan. It is easy to apply. The lender will only check your personal credit score and your income to grant this loan.
- Low APRs:
Another benefit of using a personal loan for business is that you will get easy terms when getting the loan. A personal credit score is always better than business history. If you have a good credit history, the lender will give you a loan on easy terms. You will get a fixed installment payment and longer tenure of the loan.
You can use the money from a personal loan for any business activity or expense. When you take a business loan, you have to use the loan money only for specific activities. Example, Working Capital Loan for working capital requirements. But you can use personal loan money for anything you want to do in your business.
Cons of Personal Loan for Business:
If you want a personal loan for business, the lender will ask you for collateral. If you are using it for an emergency, there will be no collateral security. So if you cannot pay it back, you will have to risk your personal asset.
- No Business Credit:
You can build business credit only if you take a business loan. With a personal loan for business, you will not be able to build business credit.
- Small Amount:
Normally business loans are given for a huge amount of money. But when you take a personal loan, you will get it for only a small amount. The amount of personal loan is always less than other loans.
- Mixing Finance:
By taking a personal loan for business, you will mix the finance. It is always advisable to keep personal finance and business finance separate. But when you mix it, you also mix the liability. You will be personally liable for the loan.
How to Get the Loan?
This loan is only given to those individuals who have a good credit score. If you have already taken many loans and your credit history is bad, you cannot apply for it. Even if you get the loan from a private lender, it will be of a higher interest rate.
To get this loan, you need to check with various banks and money lenders. Contact them and compare their loan prices. You can get a personal loan from business from $1000 to $100,000. Some lenders give a tenure of 5 years while others give for seven years.
Apart from taking personal loans for business, you can check other alternatives as well.
- Business Line of Credit:
It is like a business credit card. You will get the loan amount in your account. You can use all or a limited amount from that account. You will have to pay interest on the amount you use. This option helps you to get a loan for a good amount.
- Business Credit Card:
You can also use a business credit card for business expenses. Initially, the interest rate is 0%, but the interest rate will increase as you go. It will depend on your creditworthiness. The limit will be less.
There are many other options to fund your business rather than taking personal loans. When you take a personal loan for your business, you put your personal property at risk. Almost the interest rate might not be suitable. You can check for other business loan options, which are more feasible. But if you need urgent credit, then you can go for personal loans for business. Make sure the loan makes sense.