Pros Of Cons Of Bank Loans
July 5, 2018
Pros Of Cons Of Bank Loans
The loan is just getting the amount from the organization or bank to either a person or some other organizations. The loan can be given either for starting up a new business or for getting some equipment to develop the business. A loan will build a bridge between the lender and the borrower. The borrower has to pay an interest which will be calculated based on the principal amount and it should be paid by the borrower to the lender on a regular basis. The banks and other credit card companies consider providing loans as one of their main activities. Because they can earn more money by collecting interest from the borrowers. We can just click on uTrader review and learn the rules and regulations for getting a loan from the banks.
Advantages of bank loans:
Taking a loan in the bank is not an easy thing. have to submit many documents to the bank to approve the loan amount for our business. The secured and unsecured personal loans have many advantages and disadvantages in it. Let us first discuss the advantages of the loan.
The bank loans are highly flexible and it allows us to pay the installments online. We can also overdraft the payments when the bank once demands it. The bank will never care about the purpose of getting a loan, so we can invest the loan amount in any business which suits us very well.
- Cost effective:
Taking loan in a bank is cost-effective because once we use overdraft or credit cards for getting loans, the interest rate will be 13% whereas, for a bank loan, the interest rate is just 8%. So, it will definitely help us in saving our money.
- Benefits of tax:
The interest we pay to the bank for the loan amount we get is a tax-deductible expense. So, our yearly interest will be deductible based on 1040 schedule tax form.
Disadvantages of bank loan:
Though there are many advantages to a bank loan, there are some disadvantages too. Let us take a closer look at those disadvantages.
- Strict requirements:
There is a strict requirement in all banks that the borrower should give some collateral for their loans to be approved. So, the borrowers find it so difficult to get loans and when they go for unsecured loans, they should pay a very higher rate of interest. This is not cost effective.
- Repayment burden:
The main disadvantage of getting a loan is the burden of repayment. Everyone will have the fear in mind whether we are able to repay the loan amount in the correct period of time. Because the installment should be paid on the correct date on a regular basis. So, definitely, it becomes a burden and the people get stressed very much. The banks will send us a notice if we fail to pay the interest amount at the correct time.