Advantages and disadvantages of taking a loan from the bank: Hello friends, how are you, once again you are very much welcome on our website. Everyone needs money to live life. Whenever we have to face difficulties then the first option is present in our mind. That is bank loan In present times people do not take loan from bank only because of any financial problem but also take loan from bank to fulfill their personal needs. If loan for new or old car or loan for flat, education loan etc.
But taking any type of loan is a risk in everyone. At the same time there is pressure to repay it, so today through this post we will know what is a bank loan? Apart from this, you will also know about the advantages and disadvantages associated with it. If you are planning to take any type of bank loan then this post will help you to a great extent in taking the decision.
What is bank loan?
Whenever a person needs to fulfill his personal needs or social needs. Then for this he thinks about taking a loan from the bank, this loan from the bank is known as bank loan. Bank loans are of two types first principal and second interest.
The principal amount decreases as you take more loans to meet your financial needs. The additional charges on the principal that you pay to your bank is called the interest rate.
- Types of Bank Loan Advantages and Disadvantages
Generally bank loan is divided into two parts
Secured Loan: The bank loan in which the customer has offered his property as a security deposit in lieu of the loan is called Secured Loan. Such loans are usually taken for a longer tenure. In case of non-payment of the loan, the financial institution has the right to attach your property.
Unsecured Loan: Bank loan in which the borrower of the loan is not required to offer any of his assets as a security deposit and brings the unsecured loan i.e. unsecured loan. Such loans are usually given for a certain time period.
Examples of loan given by the bank
- Personal Loan
- Education Loan
- Mortgage Loan
- Home Loan
- Car Loan
- Two-Wheeler Loan etc.
- Benefits of bank loan
On hearing the name of bank loan, many types of assumptions are formed in the mind of the people that it must have disadvantages. But this notion is absolutely wrong in the minds of the people, it is 100% true that it has potential disadvantages. But this thing also cannot be denied at all that it does not have its benefits. Many types of benefits related to bank loans are as follows.
Bank loan is not permanent but temporary, after repaying the amount taken from the bank in the form of EMI, the bank has no relation with its loan customer. Rather, if a loan customer has to repay the loan taken from the bank in time. So he is offered an attractive interest rate from the bank to take the loan again.
Money is received even when there is no cash
The biggest feature of a bank loan is that in case of unavailability of cash, the bank or financial institution issues the loan. Which is used by people to meet any kind of their needs, usually taking a loan from the bank is beneficial for those who want to start their new business.
driver of growth
Bank loan is considered a major driver of growth for any country as well as for the companies there. There are very few companies in the country which have full cash balance. Even in such a condition, the bank keeps such a company in running condition by giving money in the form of loan to function smoothly.
fair interest rate
Generally, the interest rate charged by the bank on any type of loan is very low, it ranges from 6% to 11% per annum. Which is much less than the loan taken by any moneylender.
The banking system and system functions completely under the supervision of the government. For this reason, customers get relief from problems like forgery, fraud and exploitation and there is no hesitation in taking loan or loan from the bank. Every process related to bank loan and the documents involved in it are properly scrutinized and then the loan is allotted.
On taking any type of loan from the bank, the bank sets some time for its customer to repay it back. During that period, the bank recovers the loan given by it in the form of IMI every month, which in itself gives a lot of convenience to the customer. This time can also be from 6 months to 10 or more years.
The biggest advantage of the borrower is that tax exemption is available. The interest paid on the bank loan helps you to get tax exemption on your income. For small borrowers, this amount may not matter but for large borrowers, there is a huge difference in the amount of tax exemption. And for them this amount can range from lakhs to crores.
Disadvantages or Drawbacks of Bank Loans
You have come to know the benefits related to bank loans, but you should also know some disadvantages related to it. Which a common man should be aware of, the possible loss of taking loan from the bank is as follows:
Getting a loan is not that easy
Getting a loan issued from any bank is still a pain in the ass, till then it can be a difficult task for any businessman. The bank thoroughly scrutinizes all the documents submitted by the customer before issuing any type of loan unless he has a good business record. Till then the bank does not complete this process till then the loan is not issued.
pay extra money
The biggest drawback of taking a loan from the bank is that the borrower has to pay more than the actual cost of the item. Consider it as a quote that the cost of a watch is ₹ 1000 and you already have ₹ 400, now you want to take the remaining ₹ 600 as loan.
So in such a situation you will get 600 loan at 10% interest rate. But after one year you will have to pay ₹60 extra on ₹600.
Bad Credit Score and Security Deposit
If the credit score has deteriorated due to any reason and you do not have some asset as security deposit. Then you will hardly be able to get a loan from the bank or if there is a lack of any one of the two things given above, then there can be a lot of problem in taking a loan from the bank.
Strict in terms of repayment
The bank is very strict in terms of its loan recovery. If you miss one month’s EMI due to any reason, your credit score will be reduced by the bank. In case of repeated non-payment of EMIs on time, your credit score may be permanently damaged. And in future you will face more problems than you get in any type of loan.
Most of the banks charge a processing fee for allotting the loan which is enough for the already troubled and desperate people then the problem arises. Not only this, sometimes these processing fees are deducted from the money being given as loan. Therefore, before getting the loan allotted, it must be known that you are not being fooled in the name of processing fee.
So friends, now through this post, we have told you what are the advantages and disadvantages of taking a loan from the bank? 2023 as well as we have answered you different type of questions complaint or suggestion you have in mind. So you can definitely tell us by commenting below, we will definitely help you. Apart from this, if you like this post, then definitely share it with your friends on social media platforms.