Today customers not only have the option of choosing a lender but also have a host of loan products that cater to their requirements. Banks are aware that in such a competitive environment processing the loan in quick time is important along with offering benefits and features of the loan product. Secured and unsecured loan options are the ones that customers can think of when looking for loans.
A business requires a lot of investment of time and energy. But crucially, businesses also require funds to continue steady operations. One way a business can obtain funds is by opting for a loan. Two of the most lucrative loan options these days are a Loan against property and a quick Business loan. These two loans are gaining popularity among business owners. But which one should you choose? There are obviously advantages and disadvantages to both of these loan options. So let’s have a closer look at them to understand each one better.
What is a Quick Business Loan?
A quick business loan can help with your capital requirements. A business loan can be a more flexible option. You can make quick payments directly to the bank or the lender, and there are quick and easy prepayment options available. You might require a quick business loan for various reasons. Your business might be doing so well that you might feel the need to expand your business. You might not have funds available for that immediately. A business loan can also come in handy when you want to purchase new equipment, recruit new employees, or even improve your business cash flow.
Various forms of fast business loans are available for customers, such as Term Loans, Equipment Financing loans, Working capital loans, and many more. Some loans, such as Karnataka Bank’s Xpress loan for business offer simple processing and fast sanctioning.
What is a Loan Against Property?
A loan against property means a loan that you can avail by keeping your property as collateral. A loan against property is also called a Mortgage loan. If you’re an owner of a commercial or residential property, then you can use that property as collateral to avail a loan. A loan against property can be availed by an individual who owns the property in his/her name. It is also considered one of the most secured forms of loans for quick cash against property.
Most people have a common misbelief that once they put up their property as collateral, they have lost ownership of the property, which is not true. This type of loan has a lower interest rate compared to Personal loans. The rate of interest may vary based on various factors like the loan amount, type of property, your credit score, etc. The amount of loan you can avail depends majorly on valuation of the property and your income. This type of loan also provides a longer tenure for repayment. For example, Karnataka Bank’s KBL Mortgage Scheme loan offers a tenure of up to 120 months.
There are a few things you need to keep in mind when opting for a loan against a property. The approval of the loan depends on the value of the property and the capacity of the customer to repay the loan. The loan amount that you will receive against the property won’t be equal to the full value of the property. Depending on the bank, you can avail anywhere between 75-90% of the property’s value (Subject T&C* of a respective bank).
Which One is the Best?
You can only opt for a loan against a property when you have a property that you can mortgage. The other thing that also matters is your capacity to repay the loan. If you opt for this loan and can’t repay the amount, then your property may be auctioned to recover the loan. A loan against property is a very common type of loan for small businesses that are just starting out or for those who want to expand their business.
You should opt for a business loan only when you require funds to expand your business and there are supporting documents such as financials, business registration, license etc. Banks not only look at your credibility but also the growth prospects of your business. Business loan sanctioning may require time as compared to a loan against property. This may vary from case to case and Bank to Bank.
There are very strict guidelines for the end use of funds availed for business purposes as loan from the bank is sanctioned only for the business expansion/day to day operations. Important factors you should consider before choosing a loan are the loan requirement, repayment capacity, amount, past records, etc. You should do thorough research on both types of loans and pick one that suits your business the best.