There are several reasons for which you need to raise funds but for them, you can not go to money lenders to ask for a loan. Though money lending becomes a basic need for everyone when you are out of money. These money lenders are the only option left with you to seek money from. There are several advantages and disadvantages of money lending which are further discussed ahead. You should be aware of every pros and con to make a rational decision effectively and efficiently.
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Here are the Pros of money lending are:
Flexibility and Versatility
Money lending provides flexibility in terms of choosing tenure of repayment and fixed monthly installments. Banks and other financial institutions understand the needs well and then allow the borrowers to get the loan to fulfill needs as per their convenience but by agreeing on certain terms and conditions which is necessary for safe business.
Lower interest rates and Higher borrowing limits
Banks and various money lending institutions offer loans at lower interest rates as compared to the people who do this loan giving business and charging an unnecessary interest rate from the general public. Even you get higher borrowing limits from banks and money lenders which are capable to cover the maximum of your monetary needs.
Easy to manage
Loans raised from banks and money lending institutions are indeed easier to manage as compared to some unauthorized sources which are not even safe to rely on.
Here are the Cons of money lending are:
High fees and penalties
You may notice that money lending institutions charge a high amount in the form of fees and penalties that sake up the trust of borrowers. Then, they pursue unauthorized sources to borrow money to avoid such high fees and penalties.
Higher payment than credit cards
Credit card payment is a serious issue but it is not as big as repayment of the loan amount. Any installment that gets missed will directly affect your credit score and market reputation. The amount is itself higher than the amount you can get as a credit card bill.
Can increase debts
Money lending source is itself a debt to the borrowers like other debts. He had to pay a certain amount of money as a fixed monthly installment along with the interest that can not be neglected. This keeps him away from borrowing to avoid such permanent nature expenses.