Getting a Personal Loan or a Business Loan: Things to Remember

When you do not have money, getting a business loan or a personal loan can come as a great advantage, however, if you cannot pay back the loan, the loan will be the reason for your downfall.

Getting a Business Loan

If you don't have money, you cannot start your business. It is not easy to get funding from individuals and institutions if you are new in the market. You cannot get a loan if you do not have collateral to show. Ideas will never be great until they become successful

In case you have made up your mind to start a business but do not have funds, you can sell your assets to start a business. There is nothing wrong with this because you are trying to start a business and not gamble your money. By funding your business with the money you made by selling assets, you also don't incur any debt or bank loan. However, for a lot of individuals, this option is not viable because they don’t have assets that they can liquidize to build up business funds.

If you have decided to start a business, you have probably done everything necessary, for example, feasibility study, competitor analysis, market research, product development, etc. If you have done everything why should you be fearful about applying for a bank loan? If you think you have a perfect idea, just go for it.

If you have a business and if you have something to give as collateral, you can easily get a loan from a bank. A business loan is one of the easiest loan types, provided you have a working business (profitable business) and you have done the paperwork. In my home country, you can get a business loan in just about a week.

Getting a Loan: Banks Vs. Micro Finance Vs. Private Lenders

Micro-loans are an interesting concept. I do not know how it goes in other countries, however, in my home country you can get microloans without any collateral, all you need is a couple of people who will sign the loan agreement for you and state that they will be liable if you failed to pay.

In my place it is easy to get a microloan as you do not require collateral; however, microloans have higher interest rates compared to other types of loans. Normally, you pay 10 percent per year for a bank loan, but you will have to pay at least 18 percent for the microloans.

Unless you are borrowing from a private lender or from micro-lending institutions, you need collateral for your loan. You need collateral to get a bank loan, you need collateral even while borrowing from private lenders, The only exceptions to this are micro-lending financial institutions. However, getting a loan from the bank is not a long process, if you have papers ready, the loan processing time is really quick.

I know a lot of people who burrow to pay the debt. I think this method of loan payment will send them into the whirlpool of debt. They will never clear off their debt, they will always remain in debt. You cannot pay your debt by taking a loan. The loan should always be used for income-generating projects.

When you are trying to get a bank loan, you need project work, work that shows how much money you need and what you are going to do with the money. You need collateral to give because in case you fail bank can recover by selling your collateral; you also need to show your income source to make them certain that you can pay the loan.

Where to Get a Loan for Your Business

Peer to Peer Lending Sites: Lending club is a website where you can get a loan if you are a resident of the US. This website is also available for people in other countries, but they support only a handful of countries. You can get a loan from the lending club and you will have to pay it back along with interest.

Decentralized money markets: Perhaps you can try decentralized money markets that connect lenders with borrowers. I have not tried this but I hear that decentralized money markets are the place where you can lend your crypto assets to earn interest or borrow money against your crypto assets. There are a lot of options available.

Crowdfunding: If nothing has worked for you, you can try crowdfunding. Crowdfunding means raising capital for your business by asking people to contribute money. There are two types of crowdfunding, one, you are supposed to pay dividends, two you do not have to provide any incentives you collected from the funders.

First published on Trendri, in author's name