With the advancement of technology in various fields, the younger generation is now keener on building their own business start-ups. The young generation has become more creative and innovative and wants to become budding entrepreneurs.
You can see several business start-ups coming up these days. But the one thing that is an initial block is always the financing and investment in the start-up. This can be removed with the help of an instant personal loan for a start-up.
There are two types of loans – secured loans and unsecured personal loans. A secured loan is backed by collateral while an unsecured loan is not. Let us know more about it.
An unsecured loans is a type of loan that is issued to a borrower without any collateral or security. In simple words, lenders issue an unsecured loan based on your credit history and creditworthiness.
To understand how safe an unsecured personal loan is, you must be aware of its numerous advantages and disadvantages. Thus, let us have a look at them:
- Free of Collateral and Guarantee Protection
It is easier to obtain an unsecured loan for a start-up from a bank or financial institution as it does not involve any collateral or security. In case of secured loan, the lender can seize your collateral in the event of non-repayment of the loan. However, in case of an unsecured loan, the lender cannot seize your collateral in case of repayment.
- Faster and Easy Financing
Once you apply for an unsecured loan for your business start-up, it is a fast procedure. The processing of such loans is faster and easier than secured loans due to minimum documentation required. It is because an unsecured loan does not require any collateral. Hence, there is no requirement of assessment of the property, and you enjoy the faster processing of a loan.
- Flexibility of Repayment
Unsecured personal loans are more flexible in terms of repayment than other loans. Most loan providers issue such loans for a tenor of up to 1-5 years. It gives you ample time to repay the loan at a later stage even if your business start-up is unpredictable and not growing initially. In some cases, lenders may assess your business trading records and set up a repayment schedule based on your business’ ability.
- Loan Issued Solely on Credit Rating
There is a limited requirement of eligibility criteria for a personal loan in this case. This is the only kind of loan that is issued solely on the basis of your Credit score. Loan providers shall only assess your Credit history while issuing such loan. For this to happen, it is important that you have a robust CIBIL score to support your creditworthiness. Having a CIBIL score of 750 and above can easily get you a higher amount of instant personal loan. You can also negotiate on the interest component of the loan basis your Credit history.
- Facilitates Future Financing
Unsecured personal loans are directly related to the future financing of your small business start-up. If you take an unsecured loan for your small start-up and make timely repayments, you can establish a good Credit track record for your new business. A good payment track record will help you in obtaining a bigger business loan in future.
- Fewer Restrictions On Loan Utilization
There are fewer restrictions on the utilization of unsecured personal loans as you can utilize as per your business requirements. Banks and financial institutions do not put restrictions on the utilization of an unsecured loan as long as it is being used for business purposes. Hence, financing is unrestricted. Looking at the various advantages, you can easily see how safe an unsecured loan is for a small start-up at an initial stage. If you are ready, you can apply for it online and get going.