Month: January 2019

Advantages And Disadvantages Of Loans

Borrowing and lending have become a commonality in business these days, and this process is usually achieved with the help of bank loans. There are plenty of loan types and banking options to meet your personal as well as business needs.

For example, when you are planning to start up a business or expand your operations, you will be in need of funds. When you don’t have enough investments, it becomes impossible to make your next step. However, the availability of bank loans acts as a supportive structure to uplift your life when you are stuck with financial problems.

Bank loans will help you to meet your financial needs; however, you need to make yourself eligible for the loan and should have the determination in handling the pressure of the loan payments over a longer period. When you are sure that loan is the only option, then banks will definitely help you to benefit from the loans to achieve your goals in life.

Buying a bank loan can be both advantageous as well as disadvantageous. So, let us first see what are the advantages it has to offer?

Bank Loan Advantages

Loans Can Help You Save Money On Taxes

Some unsecured loans like personal loans, which individuals take at their discretion or to consolidate other debts are not taxable. The reason because personal loans are not regarded as part of your income when you are filing IT returns. The only criteria are, the loan should have been taken from a valid source like banks or the educational sector and not from any unknown sources or individuals.

Great Piece Of Flexibility

One of the greatest advantages of loans in public sectors and banks is due to its flexibility. The flexible terms of the loans enable the borrower to repay on a long term with fair interest prices. In fact, some loans have more flexible options like

  • Allowing Overpayments – When you have some extra money, you can pay a lump sum and decrease the term of loans
  • Pre- Payments – Some people want to get rid of the loans instantly at one shot, so they make total payment and make the closure. This is called early payment. Some lenders accept this option without charges whereas many lenders generally make a prepayment penalty for early closing.
  • Payment Holidays – When the borrower is in a bad financial condition and not able to make the installments, some lender allows for a break for some time and later allow him/her to continue making the payments. However, this involves some additional fee when you take a break from the payments.

A Smart, Cost-Effective Option

Debt can be good at times rather than losing the opportunity. If the opportunity is worth considering, then you should take funds from the banks. Bank loans open the door for your growth and success. In fact, when you are going for funds from unknown sources or private people, their interest rates are killing, although they offer loans with less criteria. However banks loans are a straightforward process, so you are completely secure, and there is no place for getting cheated. In addition, they offer loans for appealing interest rates, so your life will not be in the struggle when you are repaying the loans.

No Demand For Term Loans

Unless you violate the terms and conditions of the bank norms, banks will not demand you to repay the loans early, and rather you will have a sufficient period of three to ten years to repay your debts. Another big advantage is, at the time of signing your loan, you can request for a repayment holiday. When you are eligible for a repayment holiday, you can freeze your capital for a certain period of time, and you would require only to repay the interest during the course of time.

Disadvantages Of Loans

Higher Interest Rates For Small Loans

Banks usually offer small scale business loans with a higher interest rate. In addition, the loan amount offered is not sufficient to meet the financial needs of the company.

Strict Requirement

Subsidized bank loan requirements are very strict to make the borrower eligible for the loans. The borrower has to satisfy various requirements to meet the loan eligibility criteria.

Loan Burden During Repayment

Managing your debt situation often stress yourself and certainly impact the money in your wallet. Unless you follow the debt avalanche (clearing the smaller loans and moving towards bigger loans) your financial standards will be under pressure. You cannot enjoy your life at peace, and this often would result in an emotional imbalance.

Closing Thoughts

It is a rather a good idea to go for loans to meet your financial expenses but ensure that you don’t misuse your funds in an improper way and later regret your decisions. Though it has a few drawbacks, yet it always remained a solid source for consumers and entrepreneurs.

6 Financial Tips For Young Adults

Few financial tips for young adults that will be sure to help you along the way.Don’t wait to save and invest. Saving and investing may seem like a challenge right now, but putting away just a few dollars a week can have a big impact.Save one-third of your income.Start an emergency fund.Pay off your debt.

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