There are a lot of factors why people need to borrow money. On the other hand, banks and companies from the financial industry offer multiple lending options to best match different purposes.
One way to decide which type of loan should you go with is by determining whether you need a lump sum to cover the total amount of a one-time purchase, or do you need on-demand access to cash anytime for unexpected expenses?
A personal loan, in contrast to a commercial or business loan, is a loan to an individual for his or her own use. – Market Business News
The borrower receives the loan in a lump sum and usually, makes monthly payments until all principal, interest, and fees are paid. Some of the common uses of personal loans are:
- Debt consolidation
- Medical bills
- Student debt
- Necessary home repairs
- Repaying family or friends
- Wedding costs
- Vehicle financing
- Moving expenses
- Funeral costs
Nonetheless, personal loans can be used for almost any purpose. This type of loan is ideal when you already know the amount you will need upfront. For example, when you know how much you need to pay off your credit cards and consolidate your debt.
Line of Credit
Instead of receiving a lump sum amount upfront, you will be approved for a credit limit. Through that credit limit, you will be eligible to access the funds anytime, in any amount up to your credit limit.
People normally apply for a line of credit, or also known as a credit line, for unexpected expenses. Additionally, it can be useful for ongoing expenses as well, such as college tuition, medical expenses, travel of home improvement projects.
Taking Aspire as an example. Aspire provides a business line of credit for SMEs and startups to solve their working capital needs up to $150k. Once approved for the loan, borrowers are able to draw down the money at any amount within their credit limit at any time. Borrowers will then be charged with an interest rate. With Aspire, they will only be charged an interest rate only for what they borrowed. However, different banks and financial companies have different rates and policies.
Psst… Read on Business Line of Credit: Pay suppliers with Aspire to learn more about how the business line of credit works with Aspire.
With that being said, it is still adviced to discuss options with a trusted financial advisor to determine what is best for your situation. Personal loans and lines of credits are both a trusted form of loaning. For business purposes, however, the line of credits would be a more preferable method.
At Aspire, we envision a world where business owners have fast and simple access to the funding they need to grow. That’s why we’re on a mission to re-invent banking for SMEs across Southeast Asia.
Our current product provides SME and startup owners in Singapore with financial flexibility through a line of credit of up to S$150k. Which, can also be used to make business payments to enjoy 60 days free credit terms.