Many people don’t enjoy working for others and dream of becoming their boss by starting their own business. However, often, lack of funds can make this difficult. In such situations, a personal loan can be helpful. But, like any option, it has both benefits and drawbacks, which are important to consider before taking a loan. In this article, we will share some personal loan tips that can be useful for your business.
Interest Rate on Personal Loans
Personal loans are often taken during emergencies because they provide quick access to funds without requiring any collateral. However, it’s crucial to consider factors like the interest rate before applying. Typically, the annual interest rate for personal loans ranges from 9.99% to 44%.
Why Personal Loans Are a Good Option for Starting a Business
For individuals looking to start a business, personal loans can be a better alternative to business loans. They are easier to get approved compared to business loans, especially for those with a good credit history. A strong credit history, where repayments are made on time, ensures hassle-free access to personal loans. The CEO of Religare Finvest highlights that personal loans can be an excellent option for starting a business. This is particularly true for small and cottage industries, as personal loans help bridge the funding gap and provide much-needed financial support.
Credit Score is Essential for Personal Loans
A personal loan is an easy way to meet financial needs, but it comes with a high interest rate and a short repayment period. Having a good credit score is essential to get a personal loan.
The credit score is a three-digit number based on your credit history, showing how you have managed loans like home loans, personal loans, or business loans in the past. It reflects whether you have repaid them on time. Many small entrepreneurs struggle to get personal loans due to a lack of a good credit score.
How to Apply for a Personal Loan
Your eligibility for a personal loan also depends on your income. Businesses that do not generate profit often find it challenging to secure a loan. Personal loans can be applied for both online and offline. To apply, you need to provide documents like an identity card, bank statements, and income proof. Before taking a loan, carefully consider the interest rate, repayment period, and overall benefits to make an informed decision.
Top Ten Banks for Competitive Business Loan Options
- HDFC Bank – Interest from 10.5%, flexible tenures.
- ICICI Bank – Loans up to ₹2 crores, rates from 11%.
- SBI – SME loans, MCLR-based interest rates.
- Axis Bank – Rates starting at 11%, suited for SMEs.
- PNB – Tailored MSME loans, supports women entrepreneurs.
- Bank of Baroda – Rates from 10.35%, ideal for MSMEs.
- Kotak Mahindra Bank – Unsecured loans up to ₹75 lakhs.
- Union Bank – MSME loans with government schemes.
- Yes Bank – Cash-flow-based loans, flexible terms.
- Canara Bank – Low-interest options for small industries.