A loan is a financial transaction where a lender gives the borrower money which must be paid along with interest at a specified later date. People apply for loans for a lot of reasons. It could be to start a business, buy a house or a car.
Before getting a loan, it is important to look through the advantages and disadvantages critically.
There are a lot of advantages to be benefited from getting a loan. With loans, you can get almost anything you want to buy as there are loans available for almost anything
Loans make otherwise expensive things affordable because you don’t pay at once. The method of instalmental payment makes it easier to acquire your needs and manage your short term finances more easily.
You can start your business when you want to instead of waiting till your savings is enough before you can start the business.
You can also negotiate a cheaper interest rate because of competition amongst lenders.
You can get to build your dream house by getting a loan and spreading the payment over a period of time.
Applying for loans has its disadvantages as well, this includes the following:
You can be penalized if you don’t repay your loan when it is due.
Missing out on repayment of loans can lead to repossession of your property.
You can also get penalized if you make a lump sum repayment to offset your loan before the agreed time. Though some lenders will allow you to repay your loan early but they will charge you an early repayment fee.
Managing your loans well is important as you can get into trouble if you don’t make payments at the stipulated time.