Advantage and disadvantage of loan

[allison001]

First of all,what is loan?
Alone is when one receives finance from a bank, friend or some finance entity with the assurance of returning it in the future along with the principal as well as the interest. Principal is the borrowed amount and interest is the charge on receiving the loan.
What are the advantages of taking a loan?
1. Flexibility
A bank loan allows one to repay as per convenience as long as the installments are regular and timely. Unlike an overdraft where all the credit is deducted in go, or a customer credit card with a maximum limit cannot be utilised in one go

2 cost effectiveness
When it comes to interest rates, bank loans are usually the cheapest option compared to overdraft and credit card.

3. Profit retention
When you raise funds through equity you have to share profits with shareholders. However in a bank loan raised finance you do not have to share profit with the bank.

4. Benefits of tax
Government makes the interest payable on the loan a tax deductible item when the loan has been taken for business purpose.

Talking about the disadvantages of taking a loan.

I'll also like you guys to share your ideas about the disadvantages

 

[jemmy]

With proper business plan and the right attitude to business, the advantages of taking a loan are too numerous to mention because it will aid a business oriented person with the funding he needs to get a business started.

 

[Godson1]

Oh my goodness the interest rate of the private institutions is too much, I wish the Government can do something about it. collecting loan from banks is the cheapest way and their interest rate is very ok compare to others financial institutions especially in Nigeria.

 

[Caramelle]

Another advantage of a loan is that it allows you to invest in a potentially profitable business or project that would not otherwise have been possible given your current financial condition.

As for the disadvantages, loans usually come with restrictions such as the maintenance of a certain amount of cash in the bank. This means that this amount shall be unavailable for investments or other profitable activities. The company will have to pay for the interest as well as the principal at a time when the business is just struggling to survive. Most likely, the new investment has not started earning, and the monthly payment would come from the personal pocket of the owner or from the existing funds of the business.​

 

[btaliat]

Personally, I can only attribute one advantage to loan. It only good for the expansion of businesses. And that's all. Though many would have argued that loan can he used to start businesses especially when there is no source to raise fund for the business, I don't support starting a business with loan for many reasons. There won't be peace of mind for the business owners until he's able to repay the Loaj. And most time repayment is somehow difficult. Most business owners have lost their collateral because they don't have any access to repay the loans.

 

[Skysaint]

There are advantages and disadvantages of taking loans maybe as a business owner or whatever and you have clearly explained what is involved in taking up loans and what it entails.
Many people take loans for several reasons and if the loan can actually satisfy that need at that point in time then I would consider that an advantage for taking such loans. Some people take loans to sort themselves out in school which is just very rampant in my school, some take loans to feed themselves, some take loans to start up a business which wouldn't be possible if they tried handling it all by themselves. So when the money is serving it's purpose then you can call that an advantage.
But the disadvantage is actually what comes afterwards or the condition for taking up such loans. The pressure on you when running a business that wan founded by taking loans is actually a disadvantage, when the business you thought was all profitable starts disappointing you then that's a disadvantage as their may not be any other viable means to repay back the loans. Some are actually the interest rate especially loans from the private institutions, they are just way too high.
So before taking up loans we need to consider all factors and see if it's something that actually worth the stress

 

[eldavis]

Yes I know for a fact that loans do have some advantages, like they say not everything is completely bad, there are also good sides to the story as . But even with all these I don't think I would ever think of taking a loan and I seriously pray I do not fall in a situation where I have to rely on loans. Taking loans is usually easy, but paying back is the main problem and in most cases the amount of interest they add to it is just too much.

 

[Jasz]

The greatest advantage of getting a loan is the ability to make your dreams come true. Maybe you've always wanted to start your own business, but the startup costs were too much for you to handle alone. Maybe you have an idea for an art project, but you don't have the money to buy the supplies you need. Or maybe you've always dreamed of traveling the world, but flights are just so expensive!

With a loan, none of those dreams have to stay dreams. A loan can be used as seed money—the initial funding that helps get your ideas off the ground and into reality. With a loan, you can finally make all of your ideas happen, and we can help you get there.

The biggest downside is that loans have to be paid back and interest comes with them. It's important to do your research before taking out any kind of loan so that you understand what it means for your finances in both the short-term and long-term future.

Also, One of the advantages of taking out a loan is that you can keep your cash in the bank and still get the money you need for things like a home or car. You don't have to risk losing any of your money, and you can pay off the loan over time with manageable monthly payments.

Also, if you take out too many loans at once, you could put yourself in financial trouble by taking on too much debt. That can make it difficult to get more loans in the future, which can limit your buying power, and affect your credit rating.

 

[Abigael]

There are many advantages of taking loan. One of them is that it actually gives you access to the money you need. You will be able to satisfy your needs when you get the money you borrowed. Especially if it was an emergency and you don't have any other choice.

Another advantage is that you are given time to pay it back. It is not something you take today and are told to pay it back tomorrow. Therefore, you have time to plan and earn money so as to pay it back.

The disadvantage comes when you don't have a plan on how to pay back the loan. This can cause you to have so much pressure and anxiety. If you were running a business with the loan, you will end up not doing it well enough. And if you don't pay back the loan of take longer, you will have a negative credit history.

 

[Kingsley]

Advantages and disadvantages of loans, well going by the advantages first, if we look closely at our economy very well today, you will see that a large scale of businesses mostly in small scale businesses and medium scale businesses are all depending on loans. When you take a survey on what is going on in the market you will realise that business men and women depend solely on loans. I am opportuned to work with a microfinance bank and I know exactly what these business people are passing through they depend heavily on loans to operate their business. And if we look at the definition of capital we will see that it is one of the major factor that determines what makes a business to start and to grow.

Loans in most cases makes a business helps business men and women to be on their toes and this makes them to put in so much effort in making the business to work well. Because they know they are liable to the bank and hence they would not want be playful any behaviour with laxity in carrying out their business activities.

The challenges or disadvantages of loans lies mostly in the area of the high interest rate and also in the area of the payback period which is usually short and does not give the business persons the opportunity to utilize the loans very well to generate enough profit. This has been a major concern for all those who access these loans.