Do you wish to apply for a loan today? you must go true to this post it will guide you and help you also read the post carefully. When we hear the word loan what comes to our mind at first well I will explain a little about the loan before going further.
What Is Loan?
A loan is when one receives finance from a bank, friend, or some finance entity with the assurance of returning it in the future along with the principal as well as the interest.
Principal is the borrowed amount, and interest is the charge on receiving the loan. Considering that lenders take a risk by offering you the loan facility and the fear that you may not be in a position to repay the same,, they have to protect the losses by charging an amount in the form of interest.
Most loans are categorized as secured or unsecured. Secured loans pose the need for promising an asset such as a car or house as loan collateral in case the borrower defaults or does not repay the loan. In this case, the lender gets possession of the asset. Unsecured loans are
WHAT TO LEARN ABOUT LOANS & ADVANTAGE
Advantages
- Flexibility: A bank loan allows one to repay as per convenience as long as the installments are regular and timely. Unlike an overdraft where all the credit is deducted in go. Or a consumer credit card where the maximum limit cannot be utilised
- Cost Effectiveness: When it comes to interest rates, bank loans are usually the cheapest option compared to overdraft and credit cards.
- Profit Retention: When you raise funds through equity you have to share profits with shareholders. However, in a bank loan raised finance, you do not have to share profits with the bank.
- Benefit of Tax: Government makes the interest payable on the loan a tax-deductible item when the loan has been taken for business purposes.
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Disadvantages
- Hard Prerequisite: Since big finance from a bank is based on collateral, most young businesses will find it hard to finance the operations based on bank loan.
- Irregular Payment Amounts: Over a long duration payback via monthly instalment might witness variation in the rate of interest.
WHAT TO LEARN ABOUT LOANS & ADVANTAGE
