Unsecured business loans have lately become one of the most popular means of financing a business’s urgent financing needs, whether big-ticket or moderate. As these loans do not require individuals to provide any asset as collateral, any risk to personal or business asset is eliminated.
Individuals thus need to meet only required eligibility criteria to avail the loans. Zero need for security also reduces documentation and lengthy verification requirements, thus enabling hassle-free financing. With some of the best lenders, you can also secure attractive unsecured business loan rates, ensuring repayment affordability. You must, however, also find out way that help you arrive at the best interest rates on this collateral-free business financing available in the market. Below are given some of the tips you can utilise.
Ways to Secure the Best Rates on Unsecured Business Loans
1. Compare lenders
One of the best ways to secure the lowest rates on your business loan is to compare lenders in the market. With different lenders, the interest rates can vary significantly, thus making it essential to run a comparison before deciding. Such comparison takes further precedence in case of business loans availed in high quantum as even a point percentage difference in the unsecured business loan rates can mean a hefty difference in the total loan liability and your overall affordability.
2. Apply with a high credit score
As lenders heavily rely on creditworthiness of a borrower when assessing applications for unsecured advances, credit score is a critical parameter you must take care of. It is a 3-digit number ranging from 300 to 900 and represents an individual’s credit history comprising financial habits and several other factors.
Usually, it is ideal to maintain a credit score above 700 to avail unsecured loans. You can thus plan ahead to take steps that keep your credit score high for the ease of future financing avenues. Steps like timely and full repayment of credit card bills and EMIs and maintaining a fixed obligation to income ratio at not more than 50% help one improve the credit score.
3. Keep your credit utilisation ratio low
Credit utilisation is a measure of one’s dependency on credit and is determined as a percentage of credit utilised out of the total credit available. A low credit utilisation ratio of 30% or less is advised to represent low credit dependency and adequate financial discipline. Keeping the rate low can help negotiate with the lender for better unsecured business loan rates.
4. Document all income sources
You can also depict a high repayment capacity by documenting all income sources, such as salary, rental income, investment income, etc. A high repayment capacity means a reduced risk of default, thus enabling one negotiate for better rates.
5. Leverage lender relationship to negotiate
You can also apply with a financial institution you hold a long and reliable history of lending with, and leverage your existing relationship with the lender to secured affordable rates. Financial institutions are usually open to negotiate with existing and reliable customers on various terms of lending.
Along with unsecured business loan rates, you must also keep other factors in mind to ensure repayment affordability. For instance, choosing a short tenure can keep the EMIs low. Make use of an EMI calculator to make such estimations and apply.
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