Launching a startup requires a lot of time, planning, patience, and of course, a considerable amount of money. Fortunately, personal loans are readily available these days, serving as the best funding options for aspiring business owners. Most people believe that personal loans are for individuals looking for funds to cover their big-ticket expenses. However, in reality, many borrowers also use these loans for startups. Let’s know more about these types of loans and how to avail of them.
What are Personal Loans?
Easy personal loans are lines of credit that people typically use for large purchases. As their name suggests, borrowers use them to cover the costs of any personal expenses, such as costs of a wedding, home renovation, medical emergency, vacation, education, and more. Since there are no hard and fast rules on their end-usage, individuals looking to start a business can also use a personal loan.
Benefits of Using a Personal Loan for Startup
These are a few benefits borrowers get by funding their startup using a personal loan:
● Ample Loan Amount: Personal loans make generous loan amounts available at competitive interest rates.
● No End-Use Restrictions: Since a personal loan is the borrower’s money, they may use it to fund planned or urgent expenses without notifying the lender.
● Easy Eligibility: Compared to other loan types, personal loans have easier eligibility conditions that most borrowers can fulfill. Most lenders have eligibility criteria for the borrower’s age, income, employment, DTI ratio, credit score, etc.
● No Collateral Requirement: Personal loans are unsecured, so borrowers do not need to pledge any asset as collateral. They can avail of a personal loan without any guarantor, security, or collateral.
● Minimal Documentation: Easy eligibility conditions also come with minimal documentation requirements. Applicants simply need to provide essential documents to prove their identity, address, and income.
● Flexible Repayment: Personal loans have flexible repayment tenures, allowing borrowers to choose their loan term according to their repayment capacity. Most lenders provide a personal loan calculator on their websites, which applicants use to calculate their EMIs and find a loan term with the EMI amount suitable to their budget.
● 100% Paperless Processing: Applicants do not need to visit the lender’s office even once. They may apply for a loan and upload their documents through the lender’s website or app.
● Online Application: Most lenders support online loan application procedures these days, making the loan application and approval procedures much faster and easier than ever.
Factors Affecting Personal Loan Eligibility
Although most lenders offer easy personal loans readily to most applicants, here are a few factors that affect an applicant’s eligibility. These include:
● Age: The applicant should be within the age bracket required by the lender. Ideally, they should be in their prime earning years rather than at the beginning or end of their career.
● Income: Lenders look at the applicant’s income to ensure enough funds for timely loan payment.
● Credit Score: Lenders largely depend on the applicant’s credit score to determine their creditworthiness. They decide the loan amount and interest rate for an applicant based on their credit rating.
● Debt-to-Income Ratio: An applicant’s other financial obligations play a crucial loan in their loan eligibility. Typically, a lender would not lend more loans to an applicant with a DTI ratio of above 30-40%.
Finding the Best Personal Loan Lender
There are hundreds of lenders offering personal loans out there. However, prospective borrowers must research and compare them wisely to find the best one suitable for their needs. Some parameters applicants must compare – the loan amount, interest rates, customer service, repayment terms, processing fees, additional charges, eligibility conditions, documentation requirements, etc.
Easy personal loans are effective ways to cover the expenses of launching a startup. It is crucial to decide the loan amount to borrow, compare lenders, and take out a personal loan most suitable to the borrower’s requirements. Getting the best deal on a personal loan is an excellent way to give a perfect start to a business.