Business loans are a quicker and safer way to get monetary fund for business as compared to other sources like taking financial help from relatives or friends. Business loans are one of the best and most attained sources of business funds.
Generally, business loans are of two types – Secured business loan and unsecured business loan. A secured business loan becomes a better option when your business is new. A secured business loan comes along with many advantages, few of which are discussed below:
Lower Interest Rate
The interest rate of a secured business loan comes off as quite reasonable. Since the lenders have less “risk factor”, they give business loans at a lower interest rate as compared to an unsecured business loan.
Better Repayment Terms
The period of the loan of a secured loan for small business is fairly long. This longer tenure period promises a small EMI amount. Paying out huge amounts in EMI may appear to be very burdensome when your business is new. Ergo, before opting for a business loan, check your EMI with business loan EMI calculator. Smaller EMIs allow your business to keep moving on without many responsibilities.
If you need money urgently, then a secured business loan can help you get the desired money quicker. The eligibility check is very strict and tight when it comes to unsecured business loans. But if you apply for a secured loan, you can easily get the loan amount because the lender only has to evaluate the market value of the collateral before they pass the loan.
Scope for Negotiation
Securing a loan gets hassle-free when you are equipped with valuable collateral to put up against your loan. Owning collateral gives you the leverage to have a negotiation with the lender.
Higher Capital Amount
The loan amount of a secured business loan is directly dependent on the value of the collateral. You can easily get a business loan of a high amount if your loan collateral is of high value.
Can Avail Even If You have a Low Credit Score
Collateral is one of the most important checklists of the lender if you are going for an unsecured loan. But when it comes to a secured loan, lenders usually give out loans even with a less credit score.
Enhanced Chances of Qualifying
When you add security to your loan, the chances of getting the approval on the loan application is also enhanced. Most of the secured loan application gets approved as the perils of turning the loan into NPA is close to nil in secured loans.
Uninterrupted Ownership on the Collateralized Property
One best thing about secured loans is that the collateralized property can still be used by the borrower. In order to use the loan, the borrower must submit the mother deed of the property to the lender. But the property can still be used since it was in use before the loan process. For example, one can still live in the house which has been used for loan collateral purpose. But the house has to be vacated if the borrower defaults the loan.
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