Every human has his own dreams and wishes to fulfill his dreams. These dreams don’t seem to be limited and can’t be controlled. To fulfilling his dreams, he needs monetary assistance leading to understanding the importance of loans.
Money plays a vital role in the life of humans. It has become more than a necessity in today’s world. No work is possible without the aid of money. It is not really possible for every individual to have a sufficient amount of money to accomplish his wishes. Thus to get the required sum of money he borrows money which he later pays off. This activity of borrowing money is an important feature of the loan.
In technical terms, a loan can be referred to as a debt or a liability. Whereas, in a simple or literal sense the importance of loan means the understanding between the lender and the borrower in which the lender provides a sum of money or money’s worth to the borrower which he agrees to pay back in the stipulated time with interest.
The amount that is borrowed is called the principal which is to be paid along with interest. Thus the person, who is at risk in the whole procedure, is the lender and it becomes necessary for the lender to understand the importance of personal loan for professionals.
The rate of interest is decided by the lender. Different methods are used for calculating the rate of interest. The lender of a loan can be an individual, a bank, or any financial institution.
It is not necessary that the personal loan interest rate is the same. Also, the time to pay back the loan is decided by the mutual consent of the lender and the borrower. The rate of interest is set on the premise of the quantity of the loan that’s given and also the amount that’s granted for the compensation. The money that’s borrowed is to be paid back in installments.
The installments may be monthly or quarterly depending on the amount of the loan. In certain situations, the lender asks for security from the borrower against the loan that is given by him which highlights the importance of loan. This security is nothing but a guarantee. It may be equipment or land or anything that the borrower is in possession of. By doing this, the lender reduces his risk on the loan that he grants. The borrower holds the title on the land or property or the asset that he gives as security but would end up losing it if he is unable to pay back the debt.
If not security, a contract is made while the loan is given. The contract is another way in which the lender is not at a risk. The contract works as evidence that the loan was given. The borrower cannot deny the fact that he had not taken the loan. This contract is to be signed by both parties and in case any of them fails to fulfill the requirements, he can be sued. But still, it is voidable at the option of the aggrieved party. This shows the importance of loan securities between the parties involved.
Thus the importance of loans proves to be very useful for individuals to catch their dreams. So, if you wish to buy something and you are short of money, a loan is a solution to your problem. The person applying for loans should be well informed and well aware of the policies of the company and the requirements that are to be fulfilled by him.
It is also necessary that he pays the installments on time. The applicant should be well educated to understand the terms and conditions of the agreement. Also, he must consider all the various options and then come to a conclusion as to which suits him the most and then make a wise decision.
The major Loan providers are HDFC Bank, AXIS Bank, Private Bank, etc.
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