Personal Loans Explained For People Looking for Funds

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Personal loans are a type of loan that can be used for personal purposes and goals, such as paying medical bills or consolidating debt. They sometimes come with lower interest rates than other types of loans because they don’t have to be repaid until the borrower has finished school or is no longer employed by the lender. Personal loans also usually do not require collateral because the lender trusts that it will be repaid.

This means that a borrower can often get a personal loan quickly and, because they are granted on an individual basis, they can usually ask for more money than with other types of loans.

What are the Advantages of Personal Loans

Although personal loans offer several advantages, they are an option of last resort. Usually they have higher interest rates than traditional business loans. Personal loans are used for almost any reason. Not all lenders however, are willing to extend credit for every purpose. Personal loans also have higher interest rates and fees than traditional business loans.

A personal loan is a debt that you take out in your name only through a specific lending institution.

These loans are unsecured. However, borrowers with high credit scores will often find lower interest rates. Borrowers with bad or fair credit scores usually must pay more.

Personal loans have fixed rates, which means the interest rate will stay consistent throughout the life of the loan.

The personal loans most widely available to small-business owners tend to have high APRs — around 36% or higher. This can be a real burden for businesses that have just started up and don’t have established revenue streams.

The good news is that there are some lenders, like OnDeck and Kabbage, that offer unsecured business loans to small businesses with lower interest rates than those offered by traditional banks.

Can Small Business Owners Use Personal Loans?

Small-business owners must always do their research before applying for a personal loan so they can compare interest rates and lender terms.

A personal loan might be a smart choice for small-business owners who need extra capital to fund equipment or inventory purchases, but don’t want to risk losing any of their business’s existing assets.

Personal loans are also good options for new business owners who have built up their credit scores to help ensure they receive the best possible rate.

If you are an entrepreneur with bad or fair credit, consider applying for a small-business loan through Kabbage or OnDeck. While these lenders have higher interest rates than personal loans; they will be lower than those offered by traditional banks to new small-business owners with less established credit scores.

A personal loan is a type of financing that allows an individual to access funds (usually via their credit score) for general purposes.

Some of them like home improvement, wedding expenses, etc.

When you apply for a personal loan, a lender uses your credit history to determine whether they will give you the cash and what rate they’ll charge you.  Rates charged depend on your credit scores.

Term Lengths for Personal Funding

The term length of a personal loan can vary drastically. For this type of financing usually ranges from 1 with the longest term being 20 years.

When taking out a long-term loan, you may need to get an asset, like real estate, to secure the loan.

A personal loan allows people to borrow money from a bank, credit union or online lender. Business owners can use personal loans for capital expenditures, business operation expenses and equipment purchases.

Financing sources are banks, financial institutions and peer-to-peer lenders.

Business owners can borrow from a personal loan to cover business expenses such as salaries, supplies and rent.

Common uses are inventory and equipment purchases.

Personal loans have lower credit score requirements than traditional business loans, according to the U.S. Small Business Administration (SBA).

In Conclusion

One of the main advantages of a personal loan is that it usually has a lower credit score requirement than other types of credit, such as an unsecured loan made by your bank. A disadvantage is that they result in higher interest rates than other types of business finance.

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How Much Money Can You Borrow?

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How Much Money Can You Borrow? – Here is a simple Guide

If you’re an established business and are focused on growth, you may be searching for a business loan to help you accomplish your goals. But before you apply for a loan, you’ll need to determine the best amount to ask for.

If you borrow too little, you may not accomplish your goals, and if you borrow too much it could be a financial burden.

So how do you establish the “correct” amount when seeking out loans for businesses?

Consider the Variables

The answer is simple and yet complicated. There is no right, “blanket” amount for a business loan that will work for every business owner. Meaning there’s no perfect equation that tells you how much to borrow; it’s all up to your unique business needs.

To determine the right amount, it’s helpful to consider a host of factors, including:

  • What type of business it is
  • Your business requirements
  • How are you going to use the money
  • What expenses you will  incurr

So how do you make that kind of decision without years of experience crunching numbers and assessing risk?

Borrowing More than You Need

You may be tempted to borrow a large amount of cash; overshooting your expansion budget (or whatever business project you’re looking to fund with a loan). That way, even if expenses end up being higher than projected, you still have enough cash to cover it.

But keep in mind that with a higher loan, the associated fees may be higher, too. If you borrow more than you can afford to repay, you may find yourself in an endless cycle of debt.

When you take out a loan responsibly, and for the right amount, a loan is an incredible business asset that offers you opportunity, growth, and success. It shouldn’t be a financial burden.

Borrowing Less than You Need

At the same time, if you’re too risk-averse, you may end up borrowing less money than you need. With this scenario, you could find yourself short on cash while upgrading equipment or planning a location move, and unable to carry out your plan as you intended. And, consequently, you could be left repaying a loan that didn’t benefit you to the fullest extent.

As you can see, neither borrowing high nor borrowing low is a safe strategy; you need to borrow the right amount for your needs, no more or less.

How to Borrow the Right Amount

If you don’t know how much capital you need, then you may want to consider enlisting the help of finance professionals to determine a game plan.

And, what better finance professional than your very own lending partner? You likely already have a relationship with them (or intend to begin one), and they know the intimate details of loan finances.

Finding the Right  Lending Partner for Your Needs

Successful small business owners must find the right lending solution for their needs by doing their homework. Often business owners contact lenders because they need a loan fast.

They know what they want to accomplish with the money, but most of the time they don’t  have a clear idea of how much loan capital they really need to accomplish their objectives.

Hence, speak with as many lenders as you can and share the details of your business needs.

Only then you will have a clear idea of how much you can repay realistically without stressing your finances or stretching the limits of what your business model can accomplish.

If you’re interested in discussing your financing options, eMail Us today!

The information shared here is intended to be used for informational purposes only.

 

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