STOP BEFORE YOU TAKETHAT BANK LOAN…

If there’s one thing that I wish that I could have, own and control in this economy, it would be a Commercial Bank. Owning a bank opens one up to a whole load of opportunities and possibilities when you are in the business of providing finance to people.

Now banks exist to provide people with financial products and services in order for them to meet their goals. Giving loans is just one of the services they provide. Loans stimulate the economy because access to finance helps business ventures thrive.

Now the reason for my headline above is not to scare you away from taking loans, rather it is to ensure that you consider several things before you decide to finally take a loan. Have you ever wondered why most loans require you to commence payment immediately, even without a grace period? Loans signify a period of servitude to the financial institution so you might as well ensure you have all the bases covered before taking the plunge.

The major thing to consider before you take that bank loan has to be clarity regarding what you want to use the loan for. Loans are meant to be invested in assets, defined as things that once purchased keep putting money into your pocket. I’m sorry but taking a bank loan that comes with high interest to purchase a car is unwise unless that car is meant to be used for public transport. Your best bet is to invest in something that might produce enough to pay the loan plus interest, such as a good business idea.

I have discovered in my experience sometimes that the terms and conditions of manyloans could be sometimes confusing. Therefore I strongly advocate that you read through the loan documents thoroughly and get a second opinion. All sorts of fees and charges including the interest element is factored in. I was surprised to learn that even after taking a loan if the government changes some policy your rate could increase! So don’t think everything is fixed because you have collected the loan; you could still end up paying more than you bargained for.

Bank loans are not the only way you can raise capital for business, you could try other options such as loaning from family members, or business partners who can provide much needed capital in return for a stake in the business. The loan is sometimes a huge weight on the shoulder of the loaned, thus bringing added pressure. This pressure should only be for profitable and worthwhile causes.

Loans come with signed agreements that are binding. This means that no matter what the bank must get its capital with interest. This is why I love banks. They are not set up to lose no matter what. You will have to face up to meeting your obligations to them. Defaulting also has its consequences so you need to know from the beginning that there will be little or no mercy or understanding from your banker.

Loans also come with regular and continuous deductions from your account for a significant period of time. Banks prefer that you keep your funds in their bank when you are a borrower. This allows them to deduct their funds from you at source on a predetermined date monthly. This means you will always have less to spend because they would take theirs. You would have to adjust your spending so as to take this into consideration.

Finally the pressure of having loans can affect your behavior and your approach to life, especially during the period that you need to repay. For example you cannot afford to stop thinking about business or work because you are running a race to repay which could affect your health or the cherished relationships around you. This is also the same for those who used their jobs to get unsecured personal loans. You might find yourself stuck in the same place of work as you cannot just easily resign since you cannot default on your obligations.

Permit me to stress again that I am not against taking loans, but it must be for the right purposes. Most wealthy people take loans for business purposes and they have been able to repay. If this were not the case then most banks would have folded up by now. Take heed to take all these factors into consideration before taking the plunge.