Pros and cons of taking loans
Loans are legal obligations where a creditor (a bank, financial institution or even an individual) lends money in the form of cash or an asset to a debtor for financial gain. Loans are popular in consumer markets where people go to banks to apply for personal loans and mortgages, while commercial loans tend to be for companies.
Take a look at the good points and tough aspects of taking out loans in the UK:
- Liquidity: There is nothing quite like knowing you have liquid cash reserves to tide you for your personal and business expenses. This is what cash loans achieve for you. They give you the extra money that you need in case of an emergency or a current crisis.
- Instant: One of the benefits of applying for credit is that you can get instant approval depending on which lender you apply to and what your circumstances are.
- Small business gets in on the act: Popular lenders have announced that they will now offer small business loans to customers.
- Interest rates: There are plenty of nuances in interest rates for loans. One of the most important things to be aware of is how much interest you will be charged. Consumer credit loans for small amounts such as less than £500 each tend to be put at high rates to protect lenders against default rates from borrowers. Only choose a loan if you are sure of the interest rate, which is traditionally called the Annual Percentage Rate (APR).
Shorter durations: One trend in the loan market is for the duration of loans to be shorter in order for lenders to recoup their costs. If you think it will take you longer to repay the loan, you should consider other ways of creating liquidity such as starting a side business or having a part-time job.
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