Category: Loans

loan-money

Facts about Bank Loans

People borrow money when they don’t have cash or when making a major purchase. Bank loans are known for offering flexible terms to their customers. They are not as expensive expensive as advance or payday loans. You should consider the advantages and disadvantages associated with these loans before applying for a bank loan.

Benefits

Better Rates

interest rates

You can save money on interest by borrowing money from banks. People who borrow money using their credit card are required to pay a processing fee for the money borrowed. Credit card companies are also known for charging high interests rates when issuing cash. Individuals who need money can also apply for payday loans. However, these loans are known for carrying high interest rates of about 400 %.

Making Expensive Purchases

You can easily take a loan from banks when purchasing big-ticket or expensive items. For instance, you can use the money borrowed to purchase your first home, upgrade your cars or renovate your existing homes. You can also take advantage of bank loans to consolidate your current loans. Additionally, this is an ideal option for meeting your medical expenses which cannot be covered by insurance.

Long-Term Costs

Do you need money to buy an expensive item? Banks will give more time to service your loans. For instance, some home loans have along repayment period of up to 30 years. Car loans might take a short time, but it will take you several years to pay off the car loan. Loans that have along repayment periods have a high amount of interest.

Flexibility

Borrowers are given flexible terms of interest rates, allocation requirements, and fees. These variables can vary from one bank to the other. They can also be adjusted or negotiated. Borrowers have an opportunity of shopping around for the best terms which suit them. Borrowers are advised to work closely with the banks to get the best deal possible. You should avoid loans that have high interest rates as they can make your loan unpalatable.

Disadvantages

credit history

Credit History

Most banks will use the customer’s credit history before lending him/her money. People who poor credit cannot get favourable loan terms. Sometimes it might even be difficult to secure a loan if your credit score is poor. Borrowers can build up their credit by making repaying their loans successfully.

Strict Requirements

Some banks will require some forms of collateral to approve your loan. Many people avoid going for unsecured loans because they have high interest rates.