Taking a loan is nothing new.
Countless (Many) businesses have been set up on bank loans. Loan means, “borrowing money for a purpose.” In this
Hi-Fi world, the wants of the people are unlimited. Man is not satisfied with
what he has. All the time, he is thinking of material wealth and in this race,
he finds himself short of money every time. The person who has low income tries
to borrow money from some agency, banks and other financial institutions, which
are ready to lend money to them on easy terms & conditions.
However,
there are both advantages and disadvantages to taking a bank loan, depending on the borrower’s financial health. This is
why it is necessary to understand the advantages and disadvantages of bank
loans before taking to them.
Advantages of Loan
System:
→ Easy availability:
Leading
institutions like banks are ready to lend money to the person who wants money
on easy terms and conditions. Therefore, the borrowers can easily get money
from them.
→ Uses:
A
borrower can use a bank loan for a number of reasons—either for setting up a business, or
to buy home or to go
on a holiday. In fact, a bank loan is a financial package, which helps you in
difficult time or set up business or invests
in stocks. Considering it is a loan, it means that eventually you
will have to pay the bank back within a specified time at a pre-determined rate
of interest.
→ Speed:
If
the borrower has all the appropriate documentation, any bank can process his
application within an hour.
→ Easy to return money:
It is often
very easyto pay the money back. Since we do not have o ay up the entire amount
at a time. we ge he facility of easy instalments and we can make our dreams
come true.
→
Loand through credit card or overdraft:
Personal loans are often more
popular than other sources of finance such as credit cards and overdrafts. The
loan through credit cards hel us to fulfil our desire for shopping.
Disadvantages of Loan System:
→ Borrowers
over-borrow:
People
sometimes over borrow money and are caught in their own debt. Therefore, before
taking loan, the amount which we wants should be considered in advance.
→ Prepayment penalty:
Often, loans come with a prepayment penalty, which
prevents the borrower from paying the loan earlier than the specified date
without incurring any extra costs.
→ Restrictions:
Banks
impose a number of restrictions on the transaction. This includes having a good
credit history before applying for a loan, and there are often restrictions
about how the money should be used.
Thus,
we can say that loan system may be blessing or a curse. It depends on the
person how he manages the installments of the loan. Thus, a man should think
very wisely before taking a loan.
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