Thousands of new and innovative ideas are being constructed into business ventures every year. India’s business sector is gaining momentum having more than 4,000 startups to its credit during the year 2015.

With the call for business development comes the need for finance. There are many business loan products available in the market today for small, medium and large businesses. But the business has to satisfy many criteriums to avail a business loan. Instead, for certain business needs, availing a personal would be a better choice. But, under what circumstances should you use a personal loan for business purposes? The answer to the question can be derived from the following:

Documentation and Loan Amount:

Application for personal loans involves minimum paperwork and can be done online. In case the loan amount required is small, you would not like to go through lengthy procedures to procure a loan. Personal loan satisfies your immediate cash requirements with minimum documentation.

Interest rates:

Interest rates for personal loans are much lower than business loans. Banks also offer interest rates depending upon your relationship with them. Having an account with the bank from where you are taking a personal loan is an added advantage. As an account holder, you are treated as a privilege customer, and further consideration of interest rates are extended to you. Business loans also provide you with low-interest rates but those are loans secured against your business assets.

Collateral:

Personal loans are unsecured loans. No collateral or security is to be provided for availing the loan. Therefore, if you acquire a personal loan, no charge on your personal assets is created. You can further take a loan against such property (assets) separately for crucial business requirements. Some banks do provide business loans without collaterals but those are in the form of Overdrafts and the interest rates are much higher.

Credit assessment:

In the case of startups or new businesses, virtually, there will be no credit report or track record of the business. In such a situation you can opt for a personal loan and take advantage of you personal credit ratings and track record.

Business not liable:

Your business, being a separate legal entity, will not be affected by the personal loan transactions. The bank will not have any lien on your business assets to recover the personal loan, though you will be personally liable for the payment of your personal loan. A personal loan is an excellent tool for short-term financing of your business. It ensures the smooth functioning of your business without disturbing its financial structure.

Availing a personal loan to pay your credit card debt has become a common tool to get rid of the debt spiral. Today, credits are easily available. There is absolutely no system to caution you about your credit management capacities. And access to multiple credit cards, coupled with the above, lands you in a debt pool sooner than you can imagine. Thereafter, all your energies are focused on clearing the debt amounts, which, in spite of all your efforts and inhibition, keep piling up. Your budget and savings derail and the situation continue to get worse. At such a juncture, a personal loan comes as a relief as it gives you the option of consolidating your many debts in one single debt. Moreover, the attractively low interest rates give you a sense of control and hope.

Converting your credit card debt into a personal loan may seem like a good move but without a proper debt repayment plan in place, it could only add to your problems.
Few things to consider while opting for a personal loan to deal with your credit card debts:

Clear Credit Track Record:

A good credit record assists you in satisfying both your personal and professional needs. For availing good products and offers, financial institutions need to be presented with a good track record that suggests that you have always been in a position to handle credit responsibilities effectively.

5-Year Plan

The strength of any financial plan can be determined by whether it can generate results within 5 years. You should plan your personal loan in a manner that it can be paid within the next 5 years at the latest. If not so, other options need to be considered.

Credit Counsellor

If you have determined that your debts are not manageable in your current financial scenario, it is time to see a credit counsel. It always makes one skeptical and a bit unsure to seek professional help for any matter whatsoever, and particularly for matters relating to credit. But such professionals exist and are well equipped with the knowledge and financial modules that will help you regain your financial soundness. These professionals are called “Credit counsellors”. They formulate debt repayment plan for you after considering your financial constraints. They also help you with your budgeting, saving and credit score improvement.

Debt repayment is a task which is easier said than done, but if you stick to your plans and have faith in the financial system, you will surely reach the shore of financial harmony.

Depending on one’s affinity for investments, investors can be divided into two categories – those who take risks and those who prefer to play it safe. Irrespective of the category you belong to, mutual funds can act as a preferred investment option. Mutual funds allow investors to invest in bonds, stocks and other securities, with each investor owning his/her share(s) of the holdings of the mutual fund. Before you decide to invest in mutual funds, carefully consider the following types of schemes and funds:

1. Equity Funds

The main objective behind choosing equity funds is to potentially generate high returns while tackling the inherent high risk. Equity funds are of different types, such as:
A· Index funds – involves equities of companies that form a part of the stock market index
B· Income funds – stocks with very high dividends
C· Sectoral funds – dependent on the sector of a company
D· Diversified funds – includes ELSS and RGESS
E· Value stocks, etc..

2. Open-Ended Schemes

This type of mutual fund is flexible in allowing investors to enter and exit without any end date. Investors can simply buy and redeem units on any business day at the prevailing values.

3. Close-Ended Schemes

Close-ended schemes come with a New Offer Fund (NOF) period after which new investments are not accepted. The mutual fund is conducted only for a specific time span after which it is closed and the returns are given to the investors. If an investor wants to exit before the redemption date, he can do so by selling the units through the stock exchange.

4. Debt Funds

Debt funds are low-risk-low-return mutual funds that invest in government securities, debentures, corporate bonds and other market instruments. For investors who look for more stable and stress-free source of returns, debt funds are the best choice. Debt funds can be categorized into different types based on the investment made. They include money market funds, fixed maturity funds, gilt funds and income funds.

5. Hybrid Funds

People who wish to invest in mutual funds that are more stable than equity funds, yet more rewarding than debt funds, should choose hybrid funds. Based on the balance drawn between equities and debts, hybrid funds can be divided into three types:
A· Balanced Funds involve 65% investment in equities and the rest in debts.
B· Monthly Income Plans involve only 25% to 30% in equities.
C· Asset Allocation Funds can involve up to 90% of equities based on the market conditions.
There is another type of hybrid fund that involves investing in a combination of equity, debt and gold. This involves increased expenses to have a smooth management of the diversified funds.

6. Exchange Traded Funds

Exchange traded funds, commonly referred to as ETFs, work similar to stock trading. They can be bought and sold only in the stock market and have a lower expense ratio than equity funds. ETFs based on gold (called Gold ETFs) are popular and help to safeguard the gold assets of the investor along with reassuring the quality of the metal.