Personal loans and business loans are rather similar. It is common to confuse the two. There are some similarities between the two loans but these are significantly different. Personal and business loans are both large lumps of money. You have to return that money with an interest in the specified duration.
Personal Loan VS Small Business Loans – Similarities
- The basic concept of both personal and small business loans is the same. This is the main reason that these loans are confused with each other.
- Personal loan and business loans are both given on the basis of credit or business history. You have to submit your financial details to the bank so they can mark you as eligible for a loan or not.
- They both are given on a certain interest rate decided by the lender. The time duration, however, varies from one another. Both require a credit check to decide the amount you can borrow and interest rate.
Personal Loan Vs Small Business Loans – Differences
Personal loans are taken by individuals. The loan is taken by a single person for personal needs. The loan taken is very low as compared to small business loans. The interest rate we lower as well. Personal loans can be secured by a collateral. Personal loans can be taken without a collateral as well. The payment duration is flexible. A person can pay their loan in a 1 to 7-year duration. The duration varies from bank to bank.
Small business loans are taken by individual or group of people for professional purposes. The interest rate is high on these loans also you can borrow a huge amount from them as well. Business loans are secured by collateral. You need to put up an asset of equal or greater value than your loan as collateral for the loan. The payment duration is rather quick for business loans. You have to pay the loan from 1 to maximum 3 years duration. The duration varies from bank to bank so the duration may increase or decrease in other banks.
How to Check Credit History?
Personal loans are given on basis of a person’s credit history of 1 to 3 years.
Business loans are given on the basis of the business profits and sales per month. Also, the business account history of 1 to 6 years is reviewed.
How to Finalize Either use Personal Loan OR Business Loan
Personal loans are taken when you need to pay the urgent expense. Secured loans are taken When you need to buy a car or a new house. Unsecured are taken when you need to pay urgent expenses like medical bills, college dues etc. You can borrow from $1000 to $50,000 from personal loans.
Again this limit varies from bank to bank. Business loans are taken when you need to upgrade or modify your business establishment. Also when you need to pay off another lender and you are out of time. Business loans are always used for professional purposes. The money borrowed is spent on establishment or payments of one’s business.