Before making a comparison between the processing of personal loan and processing of the business loan, it is first important to understand both personal loan and business loan in isolation.
What is Personal Loan?
It is a kind of unsecured loan issued to the person so that they can manage their expenses such as education, medical, renovation, wedding, etc.
What is a Business Loan?
It is a kind of both secured and unsecured loan issued by the bank to manage & grow business.
What is the eligibility criteria for both Personal & Business Loan?
| Personal Loan | Business Loan |
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What are the documents required for Business loan & Personal loan?
There are some common & some different documents for both Business & Personal loan
| Personal Loan | Business Loan |
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Which is a better Personal loan or Business Loan?
| Points of Comparison | Personal Loan | Business Loan |
| The rate of interest majorly remains fixed | The rate of interest varies |
| The maximum limit of personal loan is up to Rs 15 Lakhs to Rs 20 lakhs | The applicant can take loan up to Rs 50 lakhs and more |
| A credit score is the most important factor for getting a personal loan | A business loan is not provided based on only a credit score but on other factors such as business vintage. Bank statement, turnover, etc |
| A personal loan is generally for fixed tenure i.e. 1 to 6 yrs. | A business loan can be for both short and long term |
| The personal loan gets quickly disbursed if the KYC and the credit history is appropriate | In business loan, the documentations are more and the processing and the verification takes slightly more time |
| A personal loan can be used for any big and small expenses such as expenses for travel, wedding, renovation, shopping, etc. | The business loan should be used for the activities related to business such as working capital, expenses, purchase of plant & machinery, purchasing raw materials and the amount cannot be siphoned off for any personal expenses. |
We can see from the above chart that the business loan has more flexibility in terms of tenure, amount limit, selection criteria whereas Personal loan is flexible only on usage. The purpose of both the business & personal loan is different and neither of them can overlap each other.
Personal Loan & Business loan details in Pune
The comparison for business loan & Personal loan has been shared below for Pune City as an example
| Parameters | Personal Loan | Business Loan |
| Interest Rates | 10.99% – 20.75% | 12% – 27% |
| Processing Fees | 0.99% – 3.00% | Nil – 3.00% |
| Prepayment Charges | Nil – 5.00% | Nil – 5.00% |
| Cibil Score | Min. 750 | Varies as the NBFC provides loan even at a Cibil score below 750 |
| Lowest EMI | Rs 2174 per lakh | Rs 2594 per lakh |
| Repayment Period | Up to 7 yrs | Up to 15 yrs |
The applicant needs to understand the purpose of taking a personal or business loan. It should not be taken when there is no requirement, otherwise, the loan turns out to be a liability and missing out of instalments impacts the credit score negatively resulting in non-eligible for future loans even when the applicant has a strong desire for it.
Whereas, if the personal & business loan is taken in a planned manner, it turns out to be a good investment that pays back.