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5 Things To Keep In Mind Before Using Personal Loan For Startups

5 Things to Keep in Mind Before Using Personal Loan for Startups Taking a loan has become quite easy nowadays due to which more and more people are opting for a personal loan, especially for startups and to make the process of availing MoneyTap personal loan more Makes it simple.

If you too are thinking of taking a personal loan for your dream startup, then you should be aware of some important aspects involved in it.

From loan amount required to personal loan interest rates, apply personal loan There are various aspects of the loan, which you need to pay attention to before taking a loan. All these can either work in your favor or can also become a financial burden in the near future. Take a look at these 5 important things before taking a personal loan.

5 Things To Keep In Mind Before Using Personal Loan For Startups
5 Things To Keep In Mind Before Using Personal Loan For Startups

Required loan amount

It is extremely important to take the loan amount only as much as the amount you actually need. If you do not have a clear idea of ​​the required finances then you may face two setbacks. One, you can borrow less or second, you can borrow more. And both things can affect your business.

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If you borrow less than you need, it will not serve the purpose of availing a personal loan. Conversely, if you borrow more, you will end up paying more in the form of interest for the amount you don’t need. Therefore, before taking a personal loan, make sure that the amount you require.

Check Eligibility Criteria

Personal loan eligibility criteria vary from lender to lender, depending on a number of things including your age, occupation (salaried or self-employed), income.

Before applying for a personal loan, check with your bank or lending institution about your eligibility. Most lenders require the borrower to be between 21 and 55 years old and in some cases between 18 and 60 years.

Generally, income and current expenses/EMI payment is one of the most important parameters that affect your eligibility as it directly matches your ability to repay the loan. Many lenders also have a personal loan eligibility calculator, which gives users a general idea.

Rate of interest

Be sure to check the low-interest rates while applying for a personal loan. If you have a good credit history, you may be eligible for a personal loan with low-interest rates.

If your credit history and score is poor or below average, you may be eligible for a personal loan with higher interest rates which will prove to be a costly option for you.

Hence, it is advisable to apply for a personal loan only if you have a good credit history and score and meet the lender’s requirements so that you can get a personal loan for your startup at a low-interest rate.

maintain a good credit score

When you apply for a personal loan, the very first thing you need to do is get a credit report. It can be requested from any of the four licensed bureaus of the Reserve Bank of India, TransUnion CBL, Equifax, Experian, and CRIF Highmark. A credit report is basically your credit score which informs about your creditworthiness to a bank or lending institution.

The above-recognized bureaus collect information from their members to provide information about your credit history and a credit score between 750 and 900 is considered very good.

The higher your credit score, the better your chances of getting a personal loan approved. Additionally, a higher credit score will also mean that you will be able to get more attractive loan offers, which include lower interest rates, higher loan amount and longer repayment tenure.

Affiliated licenses and other legal documents

Some important legal documents and licenses are required to support a personal loan application. They are considered proof of your business being registered and legal. So, before applying for a personal loan, make sure you have the legal documents listed below:

  • business license
  • registration document
  • Copies of third party contracts
  • article of incorporation
  • Commercial lease documents (if any)
  • Franchise Agreement (if any)

The personal loan taken by you may be worth more if you keep the above-listed important things in mind before applying for a personal loan for your startup.

No matter how much amount you borrow, all these simple aspects can ultimately make a huge difference in your goal.

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