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Is An Unsecured Loan Right For Your Business?

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Choosing an unsecured loan as an entrepreneur may be an option to grow your business.  If you are transitioning from a full-time job to becoming a full-time entrepreneur like I was, having a backup plan like an unsecured loan could come in good use. One option to move the process along in your entrepreneurial journey is to consider growing your business with an unsecured loan.

Reasons To Grow Your Business With An Unsecured Loan

  • Lower interest rates: Unsecured loans have much lower interest rates compared to traditional loans, so they are a good option for when you need some additional resources to grow your business.
  • Consolidate your credit card debt: Unsecured loans can also be used to consolidate your credit card debt since unsecured loans usually charge lower interest rates than credit cards. Using an unsecured loan for this purpose will help you grow your business faster.
  • Up to $50,000 in loan amounts: Depending on the type of business you have or are looking to grow, some unsecured loan can lend you up to $50,000 depending on your credit and need for the loan.

Questions To Ask If An Unsecured Loan Is Right For You

For some people, having an extra $1,000 may be the answer to finally creating or growing the business of their dreams, but is it worth taking out an unsecured loan for? Make sure you answer all the questions honestly to know for sure if an unsecured loan is right for you.

Will you be able to pay the loan back?

Having a reliable source of income is important when taking out an unsecured loan.  If your business is just starting out, do you have another reliable source of income to repay the loan amount? Take some time to think about how you will repay your loan. Don’t focus solely on your business income, focus on other means of income you have that can repay your loan.

Does it make sense to take out an unsecured loan?

Just because you’re approved for a loan doesn’t mean you have to take it. Does it make financial sense to take out a loan?  If you need a small amount of money, say for example, $1,000, to grow your business, does it make sense to take out an unsecured loan? Instead of taking out a loan, would you be able to work part-time somewhere or generate extra income on the side?

Make sure you’ve examined all avenues of generating extra income before deciding to take out an unsecured loan. Remember, taking out a loan means you have to pay the loan back as well as interest charges. Make sure your loan amount is something you can comfortably pay back and makes financial sense for you and your business growth if you decide to do so.

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Is an unsecured loan right for you?

As an entrepreneur, I can relate to the trials and obstacles that you may go through to get your business to where you want it to be. You have to weigh out the cons and pros of an unsecured loan to see if it makes sense to you.  If you ask the questions I presented above to yourself, you can make your own calculated decision on what’s best for you.

If you have a family or others who depend on you as a source of steady income, ask yourself if you are able to sustain a loan payment and take care of you business and your family. If you are not sure, you might want to consider other options. There are many ways to earn money online and many ways that you can increase your income.  You just have to be diligent and patient.  Nothing worth having will happen overnight.  It takes time to grow an empire.  With that being said, have patience in your business.  If you focus on it, it will be successful.

Talk to your spouse or mentor about your decision.  When I first started out in my business, I asked for the advice of people who were important in my life and other successful people. I wanted to get the opinion of others before making a decision myself.  After the conversation I had, I made a decision that was right for me and I am glad I was able to also weigh in on the opinion of others who had already crossed the path I was on.

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Steps to getting an unsecured loan

  1. Check your credit score
  2. Get pre-qualified for an unsecured loan
  3. Compare your offers with other credit options
  4. Read the fine print
  5. Final approval

Your credit scores and history determine your interest rates. When applying for an unsecured loan, lenders want to make sure you are able to pay back the loan you are requesting. Personal credit scores rely heavily on your approval. Lenders look at your ability to pay back what you borrow as a determining factor.

You don’t have to offer any collateral. With unsecured loans, you don’t need to use anything for collateral such as a house or car, your credit history is your collateral. It’s important to make your payments on time as if you fail to pay your loan on time, lenders can report negatively on your credit report.

Unsecured loans are calculated into your credit score. If you pay your loan on time, lenders report this on your credit report, increasing your score. The same goes for not paying timely.  If you do not pay your loan on time, your credit score can go down.

Conclusion

So, is an unsecured loan right for you? It depends on your needs. Some entrepreneurs use an unsecured loan to grow an existing business that is already bringing in consistent cash flow. Some entrepreneurs take a greater risk and use an unsecured loan to start a business from scratch. Whatever choice you decide to make, make sure you have a Plan B, C and D.

Is an unsecured loan right for you? Leave a comment below 🙂

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  • Reply
    Meghan
    May 7, 2018 at 7:54 pm

    This is really great info! I’m considering taking a loan out to grow my business but also boost my credit. Thanks for the tips!

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