Understand the difference between personal loan and business loan, and factors to check when choosing a suitable loan for you.
Loans play an important role when it comes to fulfilling any financial needs. Be it individuals funding any major life events like weddings or businesses buying inventory to keep up with sales trends, with loans you can get the necessary funding.
Although there are various types of loans that cater to different financial needs, let's check two types of loans - Personal Loans and Business Loans.
This comparison will help you understand the difference between the two and choose a suitable one for you.
Some of the main differences between personal loan and business loan are as follows:
Particulars |
Personal Loan |
Business Loan |
Use |
A personal loan can be used for various personal expenses, such as paying bills, home repairs & renovations, vacations, or even paying off debts etc. |
Business loans can only be used to fund business-related activities like purchasing inventory or equipment, covering operational costs etc. |
Interest Rates |
Personal loan interest rates are usually higher due to their unsecured nature. Rates typically start from 9.99% p.a. |
Interest rates are usually lower as depending on the collateral requirement, these loans are treated as secured loans. Rates often start from 9.75% p.a. |
Documentation |
Here are the list of documents required to get a personal loan:
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Here are the list of documents required to get a business loan:
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Tax Deduction |
Personal loans do not attract any kind of tax benefits in India |
Borrowers can get tax deductions on business loans up to certain limits as per the Income Tax Act of 1961 |
Collateral Requirement |
No collateral is required to get a personal loan |
Business loans can either be secured or unsecured, hence, collateral might be required depending on the loan type, business type, or amount |
Eligibility Criteria |
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Repayment tenure |
Personal loans have shorter repayments tenures and are flexible ranging up to 96 months |
Business loans can be repaid over relatively longer repayment tenures up to 180 months |
Disbursal Time |
Once the loan is approved, the sanctioned loan amount is usually credited into the account of the borrower within 2-3 days |
Since a considerable amount of due-diligence needs to be done before approving a business loan application, the approved amount takes a longer period of time to reach the account of the borrower |
As you can see, a personal loan and business loan differ from each other on several fronts. Personal loans cover a wide range of personal expenses that often require minimal documentation with no collateral. Business loans, on the other hand, are funds specifically designed for business-related activities, with higher loan amounts, lower interest rates, and longer repayment terms.
You must choose the type of loan based on the timeframe in which you need the loan money, the scale of your operations, and whether or not you fulfil the eligibility criteria for each of the loans mentioned above.
If you have decided on the kind of loan that will serve you best, you can either apply for a personal or business loan through Bajaj Markets. You can enjoy several benefits such as competitive interest rates, flexible loan repayment tenures and loan top-up facilities. Apply now!
