Getting a small personal business loan or mortgage loan is one of the challenges you will experience as you start your business. Although, it may seem daunting, yet with the right information qualifying for any of these types of loan is not a hard nut to crack.
When it comes to instant personal loans, there are heaps of options out there. Not only there are many small business loans available, but there are also other finance options available and one of which is Mortgage.
The debate to choose between these two is not new. For some, a small business loan is a right choice while for others, mortgage makes sense. However, choosing the right one depends on several factors.
Here is what you need to know when choosing between small personal loan vs. mortgage.
Brief Overview
Small personal loans up to $5000 help business owners to inject a bit of capital into their prevailing small business. These long-term, low-interest loans help business owners to start their business, expand it, and to use the capital for other business purposes.
On the other hand, a mortgage loan is approved only when the amount borrowed is either equal or less than the property value. It means such a loan is only approved if the value of property covers the loan amount that is borrowed.
Difference between Small Personal Loan vs Mortgage
Small Personal Loan
The purpose of the small personal loan up to $5000 is to buy equipment for business, pay rent of the commercial property, pay tax, bills, etc. In short, these loans are designed to accomplish the needs of small businesses. These are unsecured loans that do not need any sort of commercial property to get approved.
Mortgage Loan
This loan is taken for the purpose of refinancing, redeveloping a commercial property and for acquiring. It is approved only if the amount borrowed is equal or less than the worth of the property.
Types of Loans
Features of Small Business Loans
The various types of small business loans available are:
- Secured and unsecured loans
- The short and long-term loans
- The Line of credit loans
Features of Mortgage Loans
These types of loans are:
- A fixed-rate mortgage
- Adjustable rate mortgage
- Reverse mortgage
Rate of Interest
Mortgage loan
- The rate of interest of Mortgage loan is lesser than the small business loan.
- The mortgage rates assume some aspects about you: like a good credit score. A score of 740 or above is considered ‘very good’.
Small Personal Business Loan
- The rate of interest for a small business loan has a higher risk.
- The borrowers are needed to have high-credit ratings to apply for these loans.
- The maximum rate of interests set by the Small Business Administration ranges from 7.75%-10.25%, depending on the amount borrowed and the loan size.
Final Thoughts
There are a number of factors that are needed to be considered before settling on a particular finance option. The borrowers must understand their needs and weigh the advantage of each financial option to choose the right option according to their business needs.
