Starting your own business is a brave and exciting step. But like every small business, there may come a time when you need to borrow money. At this point, you may have different options in front of you. You can borrow from your family, use a traditional loan or perhaps go for a business loan from a bank or Non-Banking Financial Company. When it comes to business loans, there are two major types: secured and unsecured business loans.
Let’s find out how these two loans vary.
- Collateral requirements
Collateral is a major requirement for a secured business loan. However, this is not the case for an unsecured business loan. As a borrower, you can arrange a line of credit from the lender without the need to back the loan with collateral. As a result, there is no need to protect the loan with precious assets such as buildings, vehicles or equipment. This is an easy and flexible way to obtain funds. Here, you don’t need to worry about the loss of assets in case of a loan default.
- Cost of borrowing
The cost of borrowing can vary between unsecured loans and secured loans. Since lenders offer unsecured loans without the need for collateral, they take on more risk. As a result, the cost of borrowing can be relatively higher for unsecured loans, when compared to secured loans. So, don’t be too surprised if the rate of interest on an unsecured business loan is higher than a secured business loan. However, the overall cost of borrowing may not be too different in some cases because lending institutions may ask borrowers to pay for collateral valuation in some cases. So, consider all the fees involved when planning to take a business loan. With Bajaj Finserv, you can get hassle-free unsecured business loans up to Rs. 30 lakh to meet your various business requirements.
- Loan application time
Another significant difference between unsecured and secured business loans is the time taken to process the loan. For the lender, unsecured business loans are simple to handle and administer because they do not require any collateral valuation. As a result, your application can be processed quite quickly. Bajaj Finserv, for example, processes unsecured business loans in less than 24 hours. With pre-approved offers, you could get your loan application approved in an instant. But on the other hand, a secured business loan can take a lot longer to handle because of the various formalities involved.
- Loan tenure
The time duration available to repay the loan can vary considerably between an unsecured and secured loan. Lending institutions generally offer more extended time periods to borrowers in case of secured loans.
Secured loans pose less risk to banks and NBFCs because of the presence of collateral. But in the case of unsecured loans, lenders want the borrower to repay the money as quickly as possible because this reduces the risk for lenders.
If you want a loan that you can avail quickly, and you don’t have to worry about putting up your property as collateral, an unsecured business loan is the way to go. Lending institutions like Bajaj Finserv offer collateral-free business loans up to Rs. 30 lakh. This allows you to take care of your business needs in a quick and hassle-free manner. But before applying for an unsecured Business Loan from Bajaj Finserv, ensure that you qualify for it by meeting the eligibility criteria.