Personal loans are straightforward and are a great way to start your business. At the most basic premise, they are simply a borrowed sum of money that the borrower pays back with interest. When you apply for your personal loan. You typically need to specify the amount of money you wish to borrow.
Depending on the lender, personal loans can range anywhere from $1,000 to $100,000. Once you apply and they approve you for the loan, you’ll receive the amount of money. Then, you pay back that money in installments. Which lender is set by the specific terms of your loan?
There are very few restrictions on where you can or can’t spend the money
When taking out a personal loan, they determine the interest rate by a combination of things. Like your financial history, income, debt, and your credit score. The better your credit score, the better chance you must receive a lower interest rate on your loan. The higher the interest rate, the more money you will ultimately pay over the life of your loan.
Most personal loans are fixed-rate loans, meaning your rate and the monthly payment stay the same or are “fixed” for the life of the loan. Fixed-rate loans can make sense if you are looking for something with consistent payments each month. A fixed-rate loan is also worth considering if you are concerned about rising interest rates on longer-term loans. Suppose you have a 700 FICO and $50,000 or move-in verifiable income. To open a business, you can get access to $100,000 at 8% over 5 years.
How Does Credit Card Stacking or FICO Lending Work?
With credit card stacking, instead of having one unsecured business line of credit that you can use as a way to start your business. You use a “stack” of credit cards to accomplish the same goal. The combined limits of your credit card stack represent. Your small business has an unsecured line of credit, which you can use repeatedly.
Because credit card stacking is an unsecured business line of credit, lenders consider this type of lending higher risk. Consequently, most credit card providers prefer financing to business owners with good personal credit scores of 680+ (check your score for free).
Unsecured forms of financing don’t require any collateral. There is no need to pledge any specific assets as collateral, like your business equipment, home, or retirement accounts. However, you have to provide a personal guarantee that you’ll pay if the business doesn’t. Meaning there is some risk to your personal assets.
Some additional key things to know about how credit card stacking works are:
- Your Limit is Revolving: Anytime you draw on your credit limit, you must repay your monthly balance. Once you repay the amount you borrowed, it will be available to use again.
- You’ll Accrue Interest on Unpaid Balances: If there is a remaining balance on your monthly statement. It will accrue interest until you fully pay off the amount. A term loan is a better option if you must carry a balance beyond any interest-free promotional period.
- No Collateral is Required: With an unsecured credit card, like the Chase Ink Business CashSM Credit Card or Best Small Business Credit Cards 2019. They will not ask you to pledge either specific business or personal assets as collateral.
- You’ll Need to Provide a Personal Guarantee: A personal guarantee gives your lender the right to pursue your personal assets. If your business defaults on a small business credit card or loan.
At BitX Funding, we will submit the applications for you in aggregate and can help minimize multiple hard credits pulls on your personal credit report. However, we will charge you an annual servicing fee of 10 percent while focusing on 0% credit cards.
We have had great success getting startup businesses to access $100K in 0% credit cards. While stacking together personal term loans of $100K equaling $200K of available funds to launch your next venture!