Personal loan or Secured Loans refers to an in secured type of loan that a consumer borrows to carter for his or her wants, such as buying home appliances, a vehicle, and renovation purposes or for marriage expenses. A personal loan is given after a consumer’s ability to pay is verified, precisely the source of income, including credit history. Some amount is charged to cater to the processing fee, and the borrowed funds are credited to one’s account according to the person’s ability to pay. Making a payment of personal loans is done through fixed installment inclusive of the interest charged over a fixed time. Currently, loans come in handy; individuals get loans easily, either from banks and other lending institutions. Financial institutions solve the problem of tedious paperwork and the bulk of formalities faced by the borrowers. Also, money lending institutions provide the easiest and convenient way of borrowing loans.
Benefits of personal loans
Disadvantages of personal loans
Long term loans
Long term loans can be said to be a positive exercise between a business and a consumer. Since the flexibility of the financier’s limited investment is relatively increased, the positive credit developed makes it potentially cheaper and easier to apply for a loan in the future. It is barely possible for an individual to have enough cash at hand as the investment to a business or personal expenses; therefore, long term loans provide with necessary funds to cater for these expenses and investments. Long term loans can range from a period of 3 to 25 years.
Advantages of long term loans
Disadvantages of long term loans
- The major demerit of a long term loan is that it restricts an individual’s monthly cash flow in the next term.
- The loan interest is a great burden to the company. The investors must pay the fixed amount of interest, not considering whether they have made a profit or not.
- Long term debt has a fixed maturity date. Therefore, the lender must make the provision for payment of the loan.