Advantages And Disadvantages Bank Loan
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Taking on a loan is a major financial decision. Here are some of the important matters you should bear in mind when you choose to borrow.
To begin with, decide whether you must take out a loan for the amount proposed?
For example, if you long for a new car since all your friends have bought newer ones yet everything is fine with the one you have, do you truly wish to have the burden of the debt around your neck?
If you reply with a 'Yes I still want to borrow the money', then keep reading.
If 'No', then good for you, you go to the top of the class and can have the day off!
So now, you are still willing to borrow money. Have you considered other alternatives to having a loan?
For instance, if you have an adequate amount of money in your savings account, why not use some of it first? The sum of money you would have collected in interest on your savings will be less than the money it would have set you back in interest charges on the money you borrowed, as loan interest rates are more than savings rates. However, do make sure you do still have some of your savings held aside - if at all possible in a tax-free account such as a cash ISA - in which you cannot easily dip into the money.
You could also look at borrowing against your property, by extending a mortgage. Interest rates on mortgages tend to be lower than rates on loans, so it may be a cheap method of borrowing money. However, understand that if you are not able to keep up these overall increased repayments each and every month, you might lose your home.
Finally, when the loan is for a small sum of money and/or short-term, then why not take on an overdraft or maybe a no-interest credit card?
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