It is important to compare loans to avail the best loan for the business. Availing a loan for a business is a decision that the business owner takes only after considering a few factors. Funds are important to run a business efficiently. And there are times when a business owner does not have enough funds to meet the financial requirements of the business. So, he looks forward to availing a business loan.
That said, there are numerous business loan lenders in India. In addition, there are different loan products as well in the market. Although the type of loan you will avail will depend on your need, the loan differs in a few other factors as well. And these factors suit some borrowers and some not.
So, in order to get the best business loan product, you must know about these factors so that you can compare business loans and grab the best deal. There are so many factors on whose basis you can compare loans. But before we talk about the factors on which you can compare loans, let us first talk about why comparing loans is important.
What helps When you Compare Loans?
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When you compare loans in India, you get to choose the ideal one for your business. The availability of different business loan products although provides the borrower a lot of options to choose from. But it also tends to confuse him which one to choose. However, a business loan is availed to help the business financially.
And looking at the importance of business loans, it is important to avail the right one for the business. A business loan availed that does not suit your requirements may not serve the purpose for which it was availed. It may lead you to debt-trap or hit the business hard. So, it is important to compare all the available loan options to make a sound decision.
How to Compare Loans?
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Business loans can be compared to a few factors. The following are the same factors:
Every lender in India has different eligibility criteria. And it is not possible for you to meet every lender’s eligibility criteria. So, when you compare business loans, you need to check the eligibility criteria of every loan lender. This will help in choosing the lender whose criteria you will meet and thus, the chances of your loan application getting rejected will be reduced.
As with the eligibility criteria, every lender also has a different document requirement. Some lenders may ask for a pile of documents, while some just ask for financial and KYC documents. The loan that will suit is the one whose lenders ask for the documents that you can easily offer. In addition, we would suggest going for the lender who offers loans at minimal documentation.
Terms & Condition
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Some lenders lay rigid terms and conditions while some have lenient. Very few business owners (mostly big business owners) are able to get their loan application approved through rigid terms and conditions. The small business owners are often not able to meet all the terms and therefore, face rejection. So, you need to compare the financial products on the basis of the terms and conditions on which they are offered.
The terms and conditions of the lender must be user-friendly.
There are two types of business loans available in the market- collateral loans and collateral-free loans. The collateral loans are generally offered by banks and business loans without collateral by NBFCs and online lenders. So, first you need to compare the products on the basis of their nature – with collateral or without collateral. And once you have decided on the same, the next you have to do is the comparison between the loans of same nature.
Annual percentage rate is the annual cost of the business loan. Some business owners take that only interest cost matters, whereas there are other charges as well that can increase/decrease the cost of the loan. Instead of choosing the loan product which is offered at a low interest rate, you must choose the product with low APR – Annual Percentage Rate.