Pros and Cons of Business Loan or Personal Loan

A lot of people get a business loan or a personal loan. If you do not have your own money, if you do not have any funding sources, borrowing for the purpose of business and investment is a good idea. When you invest, you will earn a return on your investment. Likewise, personal loans come in handy when you do not have money for personal expenses.

Benefits of Business Loan in Business Development

You can get a business loan to start your own company. You can get a business loan to invest in the stock market or real estate market.

If you want to start a business but do not have start-up funds, you can apply for a business loan Loans are necessary for a business to get started if you do not have funds. However, you also start repaying the loan as soon as you receive the first installment of your loan. You are yet to make profits, but you start repaying. Therefore, you need to be very careful when you are trying to get a loan. You also need to be careful about where to invest your loan.

When you get a business loan, you should use the loan amount to develop your business. Business development means...

You improve the quality of the existing products

You research and develop new products, and introduce new products in the market

You do market research and find learn about your competitors and your target audience

You devise a new marketing plan and market your products aggressively

You increase your market coverage

These are just a few examples, you can do a lot of things for business development. If you do not have funds for business development, getting a business loan greatly helps.

Benefits of Personal Loan in Personal Finance

You can get a loan not only to start a business or invest in something but also for personal purposes. A personal loan means you get a loan to fund personal things and not necessarily in a business where you expect a return on investment.

You can get a personal loan for...

Paying for your medical bills (an operation, for example)

Buying a TV, Fridge, Washing Machine, etc.

Home improvements (adding a room, for example)

Paying for education (to enroll in a medical school, to go abroad)

If you have a regular income source but you do not have enough money to do things that you want to do, for example, get an operation, or add a room in your house, you can get a personal loan. A personal loan helps your personal finance by funding your personal expenses.

In order to be eligible for a personal loan, you need to have something that can be used as collateral, for example, gold, land, or a house. Giving collateral is not enough, you also need an income source that you can show in papers, your salary sheet, for example. Your eligibility increased if you are employed in reputed organizations like international agencies, government jobs, etc. Your employment status will increase the chance of getting a personal loan.

Consequences of Taking a Business Loan or Personal Loan

Not just individuals and businesses even the countries are selling their assets at a cheaper rate in order to repay loans. This usually happens because individuals, businesses, and even the governments treat loan money as free money, they do not use the loan money to do the right thing, they don't invest for income and profit-generating businesses and projects, therefore, their loan money does not generate income, and they cannot pay back their loan, and end up selling their asset at a cheaper price to pay back their loan. If you look at your society, you can see a lot of individuals around you who sell their assets for a cheaper rate in order to clear loans. Selling assets to clear loans is also common practice in businesses. YOu can see many examples in your country. Interestingly, some countries are selling their national assets to pay back loans. Sri Lanka borrowed a lot of money from China, they could not use the loan to earn a better income for themselves. Since they could not generate revenue from the Chinese loan, they could not pay back the loan in time, therefore, they ended up giving one of their busy harbor to the Chinese government.

First published on Trendri, in the author's name