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
- There are banks in every corner, making it easier to select the best credit offer;
- You can choose the most affordable repayment terms according to your monthly budget;
- If you have a credit line, you can get a loan without the hassle of documentation.
DISADVANTAGES OF A BANK LOAN
- 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;
- Delinquent payor will have a negative credit standing, and obtaining a bank loan in the future is difficult;
- Banks are strict when approving loan applications. Aside from the submission of loan documents, they also investigate your credit history;
- Bank loans have higher interest rates and fees, especially for long-term obligations.
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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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