5 Good Reasons to Get a Loan Now and Save Your Finances
  • October 13, 2021
  • admin

Streamlining your finances is a stringent task. Whether it is about starting a fresh venture or investing in a property, every expenditure requires proper planning, discipline and funds at hand.

Apart from this, individuals often have to deal with some unplanned and unforeseen expenses down the lane, like paying a hospital bill.

How do you tackle emergency expenses?

How do you decide the right course of action?

If you often get confused and decide upon staking all your savings, then you need to STOP AND READ FURTHER!

Why Only a Loan Option?

A loan is a financial agreement between the borrower and the lender on particular interest terms and repayment plans.

Individuals often get confused over choosing the suitable direct lenders in the UK for meeting their expenses.

Two types of loans: secured and unsecured.

With secured loans, the borrower needs to put up collateral in case the borrower cannot pay the loan amount.

Types of secured loans:

  • Home loans
  • Loan against property
  • Loan against insurance policies
  • Loans against fixed deposit
  • Loan against mutual funds and shares

On the other side, unsecured loans don’t require the person to stake any collateral, and in case the borrower fails to pay the amount, the lender cannot take anything in return.

Types of unsecured loans:

  • Personal loans (loans for marriage, home improvement, unplanned expenses)
  • Short-term business loans ( loans for working capital, traders, manufacturers)
  • Flexi loans
  • Education loans
  • Vehicle loans

In most cases, people prefer secured loans to unsecured ones due to low interest rates and the good amount of money they get to meet their financial urgencies. And unsecured loans are most commonly used as personal loans to meet expenses like home renovation, marriage, etc.

The minimum amount that can be borrowed depends on the borrower's collateral capacity and credit score.

According to the Bank of England,

“Individuals borrowed £0.4 billion in consumer credit in August 2021. Within this, they borrowed an additional £0.2 billion of ‘other’ forms of consumer credit (such as car dealership finance and personal loans), and £0.2 billion in credit card debt.”

Well, apart from the stats, one should maintain that a loan has to be repaid after a specific interval. If loan repayment is due for a year, it is termed as a short-term loan. On a company's balance sheet, a loan repayment due for more than a year is called a long-term loan.

Too much debt can ruin an individual's credit score, which is why it is essential to calculate credit score before taking up a loan.

Is it better to take loans or pay cash?

The credit Vs. The cash battle is real. In case of emergency expenses, it is best to take out a loan rather than pay from savings. Here is why:

5 Good Reasons to Get a Loan

1)      No threat to the ownership

A bank grants a loan to a business based on the firm's financial standing and its ability to make payments in full, unlike with equity finance, where the business issues shares. Banks do not take any holdings in the company to which a bank grants the loan. This means you can keep a 100% share of your company and take a loan with no external interference.

2)      Flexibility

The best part about loans is that loans are always flexible. Moreover, the terms of the loan, the interest rate, and the duration are negotiable. You can plan the course of loan repayment and adjust the terms and conditions of direct lenders in the UK.

To put it simple, if you control an asset worth £200,000 which was costing you £14000 to hold it but is growing at a value around £21000-£26000 per year, then it is indeed a very profitable investment.

Hence, flexibility in loans is a benefit that can make the repayment route a stress-free one for you.

3)      Cheap Interest rates

To talk about interest rates, bank loans are one of the cheapest options compared to credit cards and an overdraft.

Benefits of cheap interest rates:

  • More savings
  • Easy to manage repayments
  • Low opportunity cost

With more savings in hand, you can plan your living room upgrade, signing up for a course online, or planning the most anticipated vacation and MORE!             

4)      Provides capital for unrestricted business operations

For businesses that require a constraint-free flow of money to carry out business operations, banks help the companies with a flexible creditor and debtor agreement.

For example, if a company Y purchases goods for £1000, the payment has to be made within 10 days, whereas it sells goods for £1200, which it will receive in 20 days. In such a situation, company Y can borrow £1000 from the bank for 10 days and repay after it receives the payment of £1200 from the debtor

Well, apart from the stats, one should maintain that a loan has to be repaid after a specific interval. The best part about this loan is that the company has to pay interest-only for the particular number of days it has borrowed the sum.

5)      Cash Discount

The most significant benefit of taking loans is that the bank offers a cash discount. A bank supports a firm for such cash discount opportunities.

 However, the company should analyse the pros and cons before making the cash payment and availing of the cash discount. Needless to say, the benefit derived from the cash discount must escalate the cost involved in terms of interest. It is only then that the cash payment will be beneficial.

So, these are the benefits of a loan. Now comes the actual choice. Would you choose someone whom you don't know or someone whom you can rely upon?

Which are you more likely to choose: mortgage brokers or direct lenders?

Mortgage brokers act as an intermediary and help a customer choose the best by bringing the best quotes from different lenders to the table. At the same time, direct lenders are the financial institutions that provide the loan directly.

Individuals prefer direct lenders with whom they share a bond of trust and lasting relationship to secure a big loan amount at better interest rates. By doing so, they cut the middleman and thus quicken the sanctioning loan process.

Direct lenders raise capital from investors to leverage loans directly to the borrower in deals.

Why choose Direct Lenders?

  • Speedy loan execution
  • Shadow ratings ensure cost-savings
  • Lender-friendly terms of the loan
  • Flexible repayment plans

Direct lenders work collaboratively and offer flexible repayment plans along with resolving issues that the individual confronts. He will have all your information and help you in approving the loans within a few hours. At the same time, brokers might take time to approve the funds. Choosing suitable direct lenders in the UK is imperative. Analyse important parameters before finalising one.

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