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Processing Personal Loan Vs Processing Business Loan

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.

Table of Contents

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

The minimum age of the applicant should be 21 yrs and maximum age should be 65 yrs
The applicant should be a citizen of India
Applicant should be salaried and the minimum income should range from Rs 4000 to Rs 20000 (varies as per the city)
Applicant should be employed for 2 yrs
The minimum CIBIL score should be 750 to apply for a personal loan

The business of the Applicant should be making a profit, at least for the past 2 yrs.
Should have business vintage for at least 2 yrs
The applicant should maintain a minimum turnover for the respective loan amount
The minimum CIBIL score varies from bank to bank in case of business loan
Any applicant who is self-employed and files for income tax return regularly can apply for the business loan
Application by co-applicant is optional & not mandatory for business loan application.

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

KYC document such as Aadhar Card, PAN card, etc
ID card of the employee
Salary slips of the employee
Bank account statement

KYC document such as Aadhar Card, PAN card, etc
Passport size Photograph
Business proof showing the existence of business
Bank account statement
Latest ITR along with computation of Balance Sheet, Income & Profit & Loss a/c for the last 2 yrs.
Last 3 years audited financials
Other relevant documents are Sole Proprietorship Declaration, Memorandum of Association/Article of Association certificate

Which is a better Personal loan or Business Loan?

Points of Comparison	Personal Loan	Business Loan
Interest Rate	The rate of interest majorly remains fixed	The rate of interest varies
Maximum Limit	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
Credit Score	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
Tenure	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
Disbursal	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
Usage	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.

Apply for Business Loan

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.