Is a Business Loan Different from a Personal Loan?

Learn about the differences between business loans and personal loans so you can decide which one is right for you.

Is a Business Loan Different from a Personal Loan?

Commercial loans usually allow for repayment over a longer period of time, while personal loans are shorter term.

Business loans

offer more capital at a lower interest rate, while personal loans offer a smaller amount of money with a higher interest rate. However, most lenders divide their credit products into business loans and personal loans. Each type has different interest rates and eligibility criteria.

A business loan is a loan obtained by a business owner for the purpose of funding a business. Business loans are more difficult to qualify for than personal loans, as they tend to be much larger than personal loans. Personal loans offer the borrower more flexibility, as the inflow of cash can be used for both business and personal expenses. However, personal loans are usually smaller than business loans and generally have a shorter repayment period.

It can be helpful to have a clear intention of how the money will be spent and to keep separate records of business and personal expenses. For business owners who don't want to attract investors, the next step is to consider applying for a business or personal loan. Rocket Homes has a business relationship with Rocket Mortgage and Amrock, since all companies are wholly-owned subsidiaries of Rocket Holdings, Inc. To apply for either type of loan, you'll need to provide information about your legal structure and documentation of the required business licenses and permits.

The editorial content of The Ascent is independent of The Motley Fool and is created by a different team of analysts. When deciding between a personal loan or a business loan, there are several factors to consider. Both types of loan can provide you with the funding you need, whether you're launching a new company or taking your current business to the next level. In the midst of the cost-of-living crisis, many small and medium-sized companies may need access to business finance to survive.

Eligible customers using Rocket Loans will have loan options for terms of 36 or 60 months, with an APR ranging from 8.416% (discounted automatic payment rate) to 29.99% (undiscounted automatic payment rate), depending on their credit profile. If you need more money than that for your business operations, you'll want to apply for a business loan, as loan amounts can be much higher. Once approved for a personal loan, you can expect to receive the lump sum within a few business days. Business loans are an excellent option for businesses that need significant support and that want to make smaller monthly payments over a longer period of time. For convenience, you can choose to apply for a personal loan from home through one of the many online lenders out there.

When making your decision, it's important to prioritize both your personal budget and your business needs.