Should You Get a Loan for Your Side Hustle? Here’s What Gen Z Needs to Know

...

Almost half of Gen Z isn’t relying on just one source of income. In fact, over 70% of them have a side hustle, according to a report by Boston Consulting Group (BCG) and Snap Inc. It’s not just about extra cash — it’s a way to follow their passions, try something new and feel more in control of their money.

From freelancing to small online businesses, side hustles help them aim higher. But sometimes, growing a side hustle needs more than just hard work. That’s when a big question comes up: Should you get a loan for your side hustle? Here’s what Gen Z needs to know.

Things to consider before taking a loan for side hustle

Before taking a loan for your side hustle, it’s important to think it through carefully. Below are the key points to consider. They will help you make a smart, informed decision.

Have a robust business plan

Before taking a loan, it’s important to have a clear guide for how you’ll use the money. For that, create a good business plan. It should include details about your product or service, target market, pricing and growth strategy. Lenders may also want to see your plan to understand how you’ll repay the loan, so being prepared can increase your chances of approval.

Choose something that requires minimal upfront costs

Not all side hustles need big investments to get started. Look for opportunities that have low setup costs. This way, you’ll have a better chance of managing expenses without needing a large loan. Plus, smaller initial costs mean less financial pressure if things don’t go as planned.

Understand the loan terms

Loan terms like interest rates, repayment periods and fees can affect how much you’ll pay back. Before signing up for a loan, take time to understand the total cost of borrowing. Check out loans with low interest rates and flexible repayment options. This will help you manage payments easier as your side hustle grows.

Impact on your credit profile

Taking a loan affects your credit score, which plays a big role in future financial decisions. Making timely payments can boost your credit, but missed payments can hurt it. It’s important to know how a loan will impact your credit profile before you apply, especially if you’re planning to take bigger loans in the future.

When should you consider a personal loan for side hustle?

Here are the instances when you should opt for a personal loan for your side hustle:

Buy essentials needed for carrying out operations

If your side hustle requires essential tools, equipment or materials to get started or keep running, a personal loan can provide the funds you need. This could be anything from buying a laptop to purchasing inventory. A personal loan allows you to cover these initial costs without draining your savings.

For expansion

When your side hustle starts gaining momentum, you may need additional funds to scale up. This could mean upgrading your equipment, hiring help or expanding your product line. A personal loan can give you the financial boost needed to grow your business faster without waiting to save up the cash.

Alternative to business loan

If you’re unable to qualify for a business loan due to limited credit history or business age, a personal loan can be a simple alternative. The eligibility criteria for personal loans are based on your personal creditworthiness, making them more accessible. Therefore, it can be a quick way to secure funds.

Different financing options for your side hustle

There are many financing options beyond personal loans to fund your side hustle. For instance, business credit cards can help cover everyday expenses while offering cashback or rewards. Crowdfunding platforms let you raise funds from the public, especially if your idea is out of the box.

Furthermore, small business grants provide free funding with no repayment required, while peer-to-peer lending connects you with investors for flexible loans. You can also use your savings or seek help from friends and family. Then, there are microloans from non-profits or lenders, ideal for smaller funding needs.

Consider Kotak811 Personal Loans for your side hustle

A Kotak811 Personal Loan can provide you with the financial aid required to finance your side hustle. The application process is quite simple, plus you don’t need too many documents. Furthermore, the interest rates start at 10.99% per year. You also get flexible repayment options, so you can pay it back in a way that works for you. Whether it’s buying equipment, expanding your business or just needing extra funds, Kotak811 Personal Loans make it easier to turn your side hustle into something bigger.

Popular Searches on Kotak811

This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.