Personal loan vs. Business loan: Which is best to Funds for My Business

There are numerous types of loans in the market, but the main ones that we will be discussing further in this thread are business loan and a personal loan in Dubai. These two loans are different types of loans and are meant to be used for different purposes, but at the same time, personal loans in some cases tend to be used for various businesses. For this same reason, it is essential for one to understand if this is the correct option to go for and if yes, then what are the circumstances that make a personal loan the sensible choice for your business needs.

Business Loan

There are many types of business loans ranging from equipment financing, short term loans, merchant cash advance, line of credit, among many other variants. These types of loans are for a specific purpose and typically are available to cater to grow a business by helping in running it as well as scaling up its operations. The amount available on a business loan along with the tenure of the funds and the terms and conditions of a loan is set on the basis of the profile of the borrower and the purpose of opting for a loan. The interest rate charged on such loans is generally competitive but these generally require some sort of collateral as a security against obtaining it.

Personal Loan

As the name of the loan suggest these loans aim at targeting the borrowers who might require funds for various different purposes. These purposes can range from anything such as buying an electronic to financing a wedding, these loans offer a great degree of flexibility in terms of the borrower using them for any purpose that deems fit. The tenure of these loans is usually shorter, but the rate of interest charged on a personal loan in Dubai is generally high. In most cases, these loans do not require any sort of collateral as a security against obtaining it which makes it a popular choice among potential borrowers.

Tips to chose between personal loan or business for your business

The decision of opting for a personal loan to fund the business needs depends on a number of factors and needs to be evaluated carefully. Ideally, it should be a business loan that is used to finance the needs of a business, but a personal loan in Dubai can be looked at in some cases, such as the ones mentioned below:

1) Business Requirement is small

If the amount of funds that need to be raised is comparatively small, one can consider opting for a personal loan.  The procedure for application and disbursal of this loan is generally hassle-free and usually requires a smaller amount of documentation as compared to a business loan.

2) Time Period and Repayment Period

If your requirement for raising funds is to only get over a temporary deficit in funds, then a personal loan might be a sensible choice. although, there are business loans in the market that help in tackling such a situation, the ease involved in relatively opting for personal loans makes it a popular resort. Also, if you are certain about the affordability of making the repayment in the fixed tenure or even before the maturity, then you can go ahead and opt for a personal loan for your business needs. Bear in mind, the interest rate on this loan is generally higher so it makes sense to repay it as early as you can.

3) Collateral

Personal loans are a type of unsecured loan. This means one of the biggest advantages of raising funds via a personal loan is that you do not require any sort of collateral generally to avail it. At the same time, business loans are, in most cases, secured loans and require collateral against obtaining them. If you don’t have any collateral in the form of security to provide or you don’t wish to provide one, it is a good choice to opt for a personal loan for raising funds.

4) Time on Your Hands

There is quite some time involved in the approval of a business loan and disbursal of the amount to your account. These loans also generally require quite a lot of documents to be submitted, from a business plan of your business to the accounts of your business. It is pretty time consuming to obtain these documents and then to finally get your loan sanctioned. If your business requires urgent funds and you cannot wait, then opting for a personal loan is a good choice due to its quick disbursal within days. The urgency of your requirement for funds helps in making the choice between these funds.

5) Other Options are Exhausted

Last but not the least, if you have exhausted all your other options of availing a loan, opting for a personal loan might be your only choice at hand. However, a personal loan in Dubai also depends on the credit history of the loan seeker. If you have a number of loans active on your credit profile, you may or may not be able to qualify for a personal loan.

Related Links- 

Personal Loan for Self-Employed Professional & Self-Employed Individuals

Personal Loan For Business Is the Most Trending Thing Now

Personal Loan for Business in Dubai