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Disadvantages Of Bank Loans Essay

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Some of the advantages and disadvantages as researched of the sources of capital. The first should be the bank loans. The advantages of getting a bank loan is the flexibility. With bank loans, the only thing to be worried about is the regular installment payments on time. The best part is that banks don’t monitor how you use the loan as long as you make your payments on time, which means that you can invest it however you want. Other that that is the effectiveness of the cost. In terms of interest rates, bank loans are usually the cheapest. The lower interest rates will definitely save your money. Individual and commercial bank loans typically offer competitive market interest rates and other reasonable repayment terms when compared with non-traditional …show more content…

Bank loans need strict requirements. Many bank loans require some guarantees as business with less or no assets can find it difficult to get their loan applications approved. If the owners tend to choose the unsecured loans then they have high possibilities to be hit by higher interest rates. Banks have a long list of conditions that a business and the owner should fulfill and sometimes it’s not possible to meet all of them. Which means not everyone qualifies for a bank loan. To get a low-cost loan, borrowers should have good to excellent credit scores. Compared to other lenders, banks have higher standards when it comes to loan qualification. Other than that is the repayment burden. Loan borrowers must make payments on time to the banks. Those who failed to make the payments may face the prospect of having their assets seized. The worst part is when you tend to make late payments, your bank could report you to the credit bureaus which is a move that negatively affects your credit score. With a lower score, obtaining loans in the future becomes more difficult. Compared to raising money through shareholders, repayment burden is worse because shareholders don’t require regular repayments. The other disadvantage is that the risk of losing collateral. It stands the risk of being lost to the bank. The disadvantage is the irregular payment amounts. If you get a bank loan with a variable interest

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