- 1 Classification of loans
- 2 The advantages of such phenomena as lending
- 3 Is there any benefit to institutions?
- 4 What do you mean refinancing?
- 5 The pros and cons of refinancing loan
- 6 Disadvantages of a loan
- 7 Rational use of loans
- 8 For those who decided to start their own business
- 9 Do not be swayed by shopping
- 10 In conclusion
Loans have already become part of life of almost everyone, and at the moment this is one of the most common banking services that can be offered not only physical but also legal entities, in order to help them solve their financial problems. To take the credit today does not cause great difficulties. Only need to provide the minimum required documents to apply to the Bank, and the terms of approval of such application, as a rule, not large. Therefore, people actively use this feature, because you can save money on the purchase of any property or, for example, household appliances, it is very difficult, especially when such property is necessary for the person urgently. As with any phenomenon, the loan pros and cons their. About this and much more will discuss next.
Classification of loans
Loans that the Bank can provide to the citizens, classified according to the following criteria:
- By way of repayment of loans are divided into individually defined payments, lump-sum and annuity, which are most common and involve the payment on the loan in a certain amount every month.
- By way of support there are also several varieties of loans, guarantee, pledge or without security. The higher the loan size, the greater the guarantee requires the Bank to the borrower to prove their solvency. In these cases, the Bank may require security Deposit. Most often, this collateral is real estate or vehicles. Either the Bank requires a guarantee, which is a written confirmation of such guarantees by third parties. However, credit without collateral advantage that there is no risk of loss of the mortgaged property.
- On the term loan. As a rule, the period of loan shall not exceed five years, but if it’s a loan with collateral, in this case, the timing can be much more.
- The size of the interest rate.
Next, let’s analyze the advantages of the loan.
The advantages of such phenomena as lending
Overall, this process has a lot of positive sides:
- For the loan does not require many documents, but only the minimum number of points. Depending on what the requirements put forward by the banking organization, sometimes the list of documents is limited only by the passport and driver’s license, a certificate of employment and other documents are not required.
- Short term of the application – in just a few days.
- The possibility of obtaining cash immediately. The obvious advantage of a Bank loan is that the customer receives the money the same day, which allows it to promptly implement its plans or to solve the financial problems. If the Bank customer is required to make any purchase, receiving money from, he doesn’t risk his plans, because it often happens that the product that he planned to buy in a few days is sold and disappears from the counter, or the price changes significantly – the product can rise.
- Plus loan – this is a gradual payout. Currently, almost any client can choose for themselves the most suitable loan option. This is because banks are constantly reforming and developing the credit system, allowing you to have sufficient for their development and prosperity, the number of clients. The loan can be repaid monthly, these loans are referred to as annuity. The amount of payment in this case, the borrower may be individualized, taking into account their financial capabilities
- Pros-secured loans – high-limit cash loans and lower interest rates, however, we must assess all the risks.
Is there any benefit to institutions?
A plus of the loan for the enterprise is the ability to expand its field of activities. For some organizations, this banking instrument is generally start. Moreover, credit conditions for businesses are very different.
What do you mean refinancing?
Refinancing (refinancing) is getting a new loan to repay the previous loan with another Bank for other, more favorable terms. In other words, this new loan to pay off old.
The pros and cons of refinancing loan
The advantages of this loan are the following:
- Reducing the size of monthly payments.
- Change the currency in which the payments are made.
- Association loans in different banks into one.
- Lowering the interest rate.
- The removal of encumbrances of lien.
Disadvantages of refinancing:
- Waste, the senselessness of the process.
- Merge into one can be a maximum of 5 credits.
- Obtaining permission from the Bank lender.
Disadvantages of a loan
The main disadvantages of loans include:
- High interest rate on the loan, which is the main disadvantage of consumer credit. Provided that the Bank term loan tool is one of the most popular, because the advantages of consumer credit too.
- Providing customers with loans under the simplified system of crediting and execution of the applications, the Bank faces enormous risks return of funds. In these cases, banks do not have sufficient time to check all the necessary documents and the solvency of the borrower, as well as one of the objectives of banks is to attract more customers, banks are forced to compensate for possible losses in such a way that they benefit from higher interest rates on loans. Interest is charged on the General principles – the longer the repayment period and larger the amount, the higher amount will pay the borrower as interest, and the higher the overpay, if you compare the amount with the original that is not evident advantage of the loan.
- Recently banks began to offer their customers so-called interest-free loans and loans, which is a very effective marketing ploy. In such cases, the borrower attracted to bright promotions, however, he forgets that no Bank ever works to the detriment of their financial well-being. Usually in these cases, under the principal amount of such loans disguised numerous commissions for loans and services, so the Bank loses nothing, in fact – he acquires the necessary benefits even if it is minimal.
- During the procedure of processing the loan are considered official only the client’s income. If the Bank issues a loan only if the income of the borrower, that too is a significant disadvantage of credit, as today not every man can boast of “white” wages. Confirm other types of earnings the borrower has no ability, and in such cases, they often refuse to issue credit. Or he can get a loan, but its amount is very small.
- Restrictions related to place of residence and age. Quite often when the banks restrict age limits for borrowers. Thus, neither too young nor the elderly are not given credit. Plus, there are certain requirements regarding the nationality of the borrower and its place of residence.
- High responsibility, which applies not only to material obligations to the Bank. The minus lending is that if the borrower violates the terms of the loan agreement, it may have a negative impact on their credit history that, in future, significantly complicates or even makes it impossible to obtain this loan the borrower in this or any other Bank. However, sometimes, temporary financial difficulties forced the borrower to defer loan payment for one or more months, and this is the basis for the Bank said its inability to pay in the future meant it.
- Numerous charges and fees. In lending, many banks are trying to recoup their costs for business customers, and other work of its employees associated with lending. So there are various additional fees that increase the size of the interest obligations of the borrower. According to the law, banks are required to provide to the borrower all necessary information about loan terms and all available with the commissions and charges of the funds. This is a necessary condition of lending since the borrower should have an idea about what financial benefits he must be willing, if they conform to its capabilities.
- A psychological factor. If some people credit disciplinarum, on the other, its presence operates in a completely opposite direction. Many people know how to plan their spending, others are not. Often it may happen that the loan funds, the borrower takes on a certain product, but over time the pleasure of buying disappears, the goods might get ruined, be lost, etc. nevertheless, The loan obligations remain and remains the responsibility of the borrower of those obligations. Not every person is able to realize this responsibility and to determine your ability to pay the loan in advance. Over time, these people take loans again and again, appearing in “a debt hole”, with all the ensuing consequences in the form of ships and reservoirs.
Rational use of loans
The loan should be taken only in those cases when you want to buy any expensive, but at the same time necessary for life items – vehicles, appliances, furniture, or building materials for the repair of the dwelling. In such cases it is advisable to take loan for a short period, about 2-3 years to be able to pay it and this your stop financial obligation. It is not recommended to take on credit responsibility in the case of different kinds of “force majeure”, for example, a loan to pay for treatment or rest, as in these cases, there is too high a risk not to master this liability.
Very practical to take out a loan to buy a house, because in banks there are special mortgages that can take the required amount of funds at low interest rates.
For those who decided to start their own business
Big risk not to pay off the loan if the loan is taken borrowers to develop their business. This loan should pay for itself within six months, but if not, the man is at a loss. Material commitments grow and accumulate, and if the business doesn’t bring in the needed revenue, the risk increases even more.
Do not be swayed by shopping
It is not necessary to assume the loan commitments directly to the stores, in the cases of purchase of certain goods. Such quick loans involve extremely high risks for banks, so, in any case, banks offset the costs incurred by increasing the credit percentage. Overpayment for goods in these cases is extremely high. When purchasing goods in the shops much more profitable to use credit cards. In most cases, in this scheme of lending for the purchase will be charged a one-time Commission of approximately 20% of the total value of the goods purchased. However, when returning the product back to the store this Commission is usually not refundable, as is seen in the form of payment of service on execution of the loan agreement.
What you would not have experienced related to loans, it is important to remember one very important thing. Under any circumstances you need to carefully get acquainted with the agreements concluded with the financial institution. Otherwise, the consequences can be not the brightest and will spoil your joy from the fast of the money.