Wednesday, October 21, 2020

To get a Bank Loan or Not: Learn the Pros and Cons

Often, we go to the bank not only to save our money but to get a loan, such as a car loan, housing loan, or even an educational loan.


Some banks give their clients credit cards with no annual fees, which is very useful during emergencies, such as buying for big household items, such as appliances.

 

But, don’t you know that banks charge higher interest for loans while they pay so little percent in interest for our saving accounts?

 

Think about it. Perhaps, banks thrive because of this scheme. Can you imagine how they make a big profit margin if they charge 12% loan interest, but they only pay a fraction of a percent in our savings account?

Or you might be thinking that paying the minimum amount due for your credit card will give you a better bargain. Think again.

 

If you plan to get a bank loan or is currently paying your monthly amortization, here are some of the things you should know before deciding on financing your next project.


 

ADVANTAGES OF A BANK LOAN

 

1. There are banks in every corner, making it easier to select the best credit offer;

 

2. You can choose the most affordable repayment terms according to your monthly budget; 

 

3. If you have a credit line, you can get a loan without the hassle of documentation.

 

DISADVANTAGES OF A BANK LOAN

 

1. Most banks require loan borrowers to provide collateral for their loans. In case of default, the bank will get the collateral and dispose of the property to cover for the unpaid portion of the loan;

 

2. Delinquent payor will have a negative credit standing, and obtaining a bank loan in the future is difficult;


3. Banks are strict when approving loan applications. Aside from the submission of loan documents, they also investigate your credit history;

 

4. Bank loans have higher interest rates and fees, especially for long-term obligations.


Related Post:  The Benefits of Online Bill Payment

 

Final Thoughts

 

When you get a loan, you pay for the privilege in the form of interest and fees. And the costs can turn out to be higher than you expect. 

 

If you miss paying the amortization, the bank will charge you for the late payment fees, and worst, if you are in default, your property will be taken over by the bank, and you will have a negative credit rating.

 

If you have the means, self-financing is the most practical alternative. Besides getting rid of the high interest and fees, you can sleep soundly at night knowing that you don’t have to think of some bank obligations.


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15 comments:

  1. I never considered not getting one. So interesting!!

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  2. In today's time we need to be very smart with spending. Bank loan or any loan should be considered for an emergency expenses only. Thank you for this post.

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  3. I have been thinking of a car loan but i hate the idea of approaching banks to finance the same for i will end up paying way more

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  4. These are great tips! It is always best to finance one's self. But if our own funds is not enough, then a bank loan is a good option. With the pros and cons to weigh out, of course.

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  5. These are great tips! It is always best to finance one's self. But if our own funds is not enough, then a bank loan is a good option. With the pros and cons to weigh out, of course.

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  6. This is a helpful post about bank loans for people who have questions. I only deal with bank loans for cars and houses. Otherwise, we save the money or we wait. Thank you for sharing.

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  7. Well I definitely think getting a bank loan especially from a credit union is always a better option than going to an independent loan organization or worse using credit. I have been personally credit card free for 6 years and Love the freedom. But when you need a big expense beyond your cash flow, your own bank seems the best bet to start first

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  8. Of course there are advantages and disadvantages of getting a loan. I think more times it is a disadvantage and people should simplify their life and really think about what we need. Marketing experts are excellent at conviencing people that "things" will make them happy. However, in reality they really don't. On top of that, when we get loans to buy them, it just creats more stress for us.

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  9. I wish I'm liquid enough to not need a loan for my condo, but there are some loans that are "necessary" I think. But as much as I can, I try not to have credit. I don't have a credit card, actually.

    Ultimately, if you're not like my dad who's liquid enough to purchase things (LOL) you have to weigh things well. Cus you're right, the interest rate for bank loans are quite high.

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  10. Thank you for the post. Im actually in the process if applying for a bank loan for housing. We will go through with it, but it is nice to be aware of the risks involved!

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  11. I've never considered getting a loan for these same reasons, I would rather save than getting a loan and paying with interest.

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  12. Thank you for sharing this important information!

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  13. A wonderful introduction on getting a bank loan. Very informative. I love how to touch based on the positives and negatives.

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  14. this is really informative & helpful for those in need for bank loans during this pandemic time. cheers, siennylovesdrawing

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  15. very useful post. I always try not to take loan if I can

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