Personal Loan vs Business Loan: What You Need to Know

In this article, we’ll cover personal and business loans: what you can use them for, why you might get them and the different amounts or terms you can expect from each. Fees, rates and borrowing amounts can vary widely, even among loans of the same type, so make sure to do your research on a particular loan or lending product before applying.

Let’s look at the differences between business loans and personal loans.

What is a personal loan?

A personal loan is a way to borrow money to cover certain costs and pay it back at a given fixed interest rate over a set period. Personal loans are usually unsecured, which means you don’t need to put up any kind of collateral to receive them. Generally, the amounts are lower than a business loan.

For any kind of loan, you may receive an interest rate, loan amount and loan term based on your current income and other factors including creditworthiness. That being said, once you’ve been approved, it’s good practice to check your specific interest rate to ensure you can keep up with payments. 

What can you use a personal loan for?

You can use a personal loan for almost anything. Whether you’re looking to consolidate debt into a single, manageable payment or planning to make improvements to your home, a personal loan may be a financial solution. 

Reasons to get a personal loan

Emergency or unexpected expenses

There are several reasons you might get a personal loan. If you have an unexpected expense, like car repairs, a personal loan can be an option. In these cases, it’s typically best to use a personal loan for covering an expense with a precise amount, since you’ll receive your personal loan in a single lump sum.

At Citi, you can submit an application in minutes and receive a response in less than 60 seconds. If you have a Citi bank account, you can even receive funds the same business day1.

Debt Consolidation

If you have debt from multiple sources, like several credit cards, you can use a personal loan to consolidate your debt. This way, you’re only making payments to one lender at one fixed rate. Interest rates for personal loans may be lower than individual credit card interest rates, which can make repayments less costly.

Home renovations or repairs

You can also use your personal loan to pay for home renovations, repairs or appliances. This can be especially useful if you know the cost of the repairs ahead of time and can expect the loan amount you’re given to cover the expenses.

What is a business loan

Business loans offered by lenders support small business owners by providing underwritten capital   to cover specific business-related expenses.

Business loans are available for supporting a small business’ short-term growth, long-term project financing, like relocation or expansion, or covering day-to-day expenses. Citibank offers a range of borrowing options, such as lump-sum installment loans or flexible lines of credit up to $5,000,000 and commercial mortgages up to $10,000,000.

What can you expect when applying for a business loan?

Small business owners are required to submit financial documentation, like bank statements and tax returns as part of the application process. Some small business loans are also required to be secured through assets or liens.

Reasons to get a business loan

Starting or expanding your own business or acquiring an additional business are some of the most common reasons to get a business loan. There are significant up-front costs associated with these actions that a loan can help offset.

Other big-ticket expenses, like new equipment, payroll or inventory that you plan to sell, can be covered by a business loan. As you earn money by investing in these areas, you’ll be able to repay the loan.

You might also use a business loan to cover emergency expenses or consolidate existing business debt, or support day-today-expenses like purchasing supplies. 

Citibank Small Business Lending applications are available to new and existing Citi customers through your local Citibank branch. All loan products are subject to credit approval, which will require that the primary operating account of the business be held by Citibank, with authorization to debit for loan payments. Speak with a Citi Business Banker or Citibank Business Specialist at your local branch for more details.

Citi offers personal loans to both existing Citi customers and new Citi customers that meet specific eligibility criteria, including an established credit and income history along with additional factors determined by Citi. If you think you could benefit from a Citi Personal Loan, apply online today.

This article is for general educational purposes. It is not intended to provide financial or tax advice. It also is not intended to describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products. Please consult your tax advisor with any tax questions. Citi is not a tax advisor.

1 If you are approved for a personal loan with Citi, you can get your funds the same day with a Citi account, or up to 2 business days for a non-Citi account when using direct deposit. Or, you can select to receive a check by mail in approximately 5 business days.

Additional Resources

  • Start your personal loan application now!

  • Learn how FICO® Scores are determined, why they matter and more.

  • Review financial terms & definitions to help you better understand credit & finances.