Personal loan vs professional loan: all you need to know

New Delhi: If you are a professional in need of money for your work, business, or personal needs, you have a growing option of a personal loan. You can get a business loan. Business loans are loans that self-employed people like doctors, lawyers, chartered accountants, etc. can benefit without any warranty in order to upgrade their business or purchase hardware.

A business loan is essentially an unsecured loan granted to a professionally qualified person providing professional services either as an individual or as a business. These loans are given to professionals to meet their personal or professional needs.

There are several banks in India that offer business loans to clients. If you want to get a loan, you can compare the loan amount, interest rate and repayment term offered by different banks before you get a business loan of your choice.

Eligibility and Benefits: Business loans require minimal documentation, offer the most competitive interest rate, have minimal fees such as processing fees, and have no hidden fees. The eligibility to avail such a loan is based on the income and existing obligations. The lender also takes into account the customer’s credit history. Eligibility criteria will differ from bank to bank or lender to lender.

According to experts, the loan does not require any physical signing of documents or delivery of post-dated checks. The process is done through an online electronic signature of the loan agreement and the e-NACH (EMI repayment instrument), which makes it suitable for the current pandemic situation. A top-up is available in the future if the customer wishes to take out an additional loan.

Required documents: The documents required to qualify for these loans are very basic such as proof of professional qualification, Know Your Client (KYC) documents, bank statements, and proof of employment or business.

How to apply for a business loan?

You can apply for a business loan online by going to the bank’s official website and clicking on the “Apply Now” button. You will need to provide the required details and submit the necessary documents. You will also need to choose the loan amount you want to avail. After you submit the documents, the bank will review and verify the documents and if they are found to be correct, the loan amount will go to your bank account.

You can also apply for a business loan offline by going to the nearest branch of the lender from whom you want to benefit from this loan. A bank representative will help and guide you through the business loan application process.

Personal Loan: Personal loans help you borrow money for expenses of a personal nature – whether it is for an emergency, education, vacation, or any other need like a family wedding. It is a type of unsecured loan that you can borrow from a bank or financial institution if you need the funds to pay for your financial needs. The maximum loan amount depends on your monthly income. In India there are lenders who offer up to Rs.50 lakh.

How to apply for a personal loan?

You can either visit the bank’s official website to apply for a personal loan directly, or you can visit the BankBazaar website to compare loans and then apply for the right one for you.

Eligibility:

Check your personal loan eligibility before applying for a loan to avoid any hassle. Your loan eligibility depends on a variety of factors including your age, monthly income, and type of job, to name a few.

Personal loan vs professional loan:

Business loans rank against personal loans in terms of better price, flexible occupancy options, lower processing fees, higher loan amounts, and various personalized offers. These loans are tailor-made, taking into account the requirements of the professionals. According to experts, these loans are generally cheaper than personal loans and start with an interest rate of 9.99% per annum for salaried and self-employed professionals.

For example, if you take out a business loan of Rs 10 lakh at 9.99% for 36 months, the interest for the same amount for a personal loan will be 12%. A business loan can help save almost Rs 35,000 in interest expense just over the life of the loan. If the business loan offers features like partial payment at no cost and full prepayment at no additional cost, the interest outflow can be further reduced. In addition, the overall average note size for business loans usually ranges from Rs 10 lakh to Rs 12 lakh.