Loans

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Loans

“No loan is free. The costs are in your loan somewhere. Rolled into the amount to repay or even coming at a higher interest rate.” (Barbara Corcoran).

Loans are either meant for business or personal purposes. Business loans are taken for pure business purposes. Personal loans are also taken for pure personal expenses.

There are types of loans such as business loans personal loans, student loans, payday loans and others.

Investopedia.com defines and explains a loan as “the term loan refers to a type of credit vehicle in which a sum of money is lent to another party in exchange for future repayment of the value or principal amount. In many cases, the lender also adds interest and/or finance charges to the principal value which the borrower must repay in addition to the principal balance. Loans may be for a specific, one-time amount, or they may be available as an open-ended line of credit up to a specified limit. Loans come in many different forms including secured, unsecured, commercial, and personal loans.”

Loans are good or bad depending on the terms and conditions of the loan agreement. The purposes of a loan also determine whether it is a good or a bad one.

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Businesses use the money to operate. Most businesses raise their capital in the form of loans. Loans are as old as mankind and will continue to live as far as man lives.

Almost, everyone in life would experience a loan transaction whether formal or informal. Loans are integral parts of daily business transactions everywhere.

We take loans from friends, sisters, brothers and employers. We also take loans from banks and other non-bank financial institutions.

Many formal loans have interests in them. Repayment goes with the principal amount and the interest accrued.

The lender earns some interest for the opportunity lost. The money given out as a loan can attract some gains from another investment.

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Many loans taken from friends and family members are interest-free. The loans are smaller for personal purposes most of the time.

Their repayment period is also shorter and some of these loans are not even repaid.

You take a large amount of a loan for only business purposes. Its repayment could be easy.

Do not take a big loan for personal property. It would become difficult to repay and become a bad loan on you.

A loan is not a gift. It will be repaid. It should go into an income-generating venture to repay itself. A loan that is not paid with ease is a bad one.

Contract best loans for only business purposes. Which in the long term will bring more returns than the interest on the loan.

The best loan’s interest is tax allowable. But with a bad loan, you or your company bears the repayment.

A good loan should help decrease your tax liability but a bad loan helps increase your tax liability.

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A good loan is a loan that someone else pays for you. You don’t feel the pain, inconvenience and depletion in your cash flow.

This means you hedge or insures the loan contracted. So its repayment becomes pleasurable.

Good loans increase the value of your assets. If you draw up your assets, you realize the loan has added to the value of the assets, if not then it’s a bad loan

Best loans have very moderate and affordable interest rates charged on them.

Bad loans have interest rates that are skyrocketing and are unpalatable to contract. They are never friendly to repay. Most Ghanaian loans are of this type.

The interest rates on loans in Ghana are crazy and unbelievable. It is not surprising that many of the banks report higher profits year after year. Though, they create other sources of income from the same customers.

The interest rates that banks in Ghana give to savers are very low. Yet, interest rates on loans granted out to their customers are very high.

Risks on loans? They are credible and less risky and businesses with low-risk profiles in the country.

Good loans bring income home, but bad loans take away the little you have from home and give it to the lender.

The worst loans are not even meant for investment purposes. They are not investment-oriented and bring nothing home.

Best loans are free from conditions and covenants. They are not tied or attached to your personal property, in case of default, you lose everything.

Good loans allow and give an opportunity to re-negotiate interest rates downwards. Bad loans’ interests’ rates are not negotiable after signing.

Mortgages are loans. They could be good or bad depending on their purposes.

Mortgages for personal property are bad loans. But mortgages for business purposes could be good loans.

In my humble opinion, I would not take a mortgage facility for a personal house.

Ongoing mortgage facility arrangements are difficult to transfer property to another person.

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I would take a mortgage facility for a house and rent it out. The rent received should be able to help pay the interest on the mortgage, if not then no mortgage for me.

If you take a mortgage facility for personal property. , You become an employee for the mortgage company till you finish paying it off.

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You would be working very hard for them till you finish paying them. Mortgage companies need to be more innovative. They should be helpful to their clients to make payments less burdensome. That way could end up creating more businesses for them.

Many people would love to have a house. The terms and conditions do not get many people endeared to buy houses on credit.

Mortgage companies should have win-win deals. , So that their clients are not completely devastated. When it becomes difficult to make periodic instalments. Life is unpredictable.

Good loans bring home financial prosperity and wealth creation.

Bad loans increase our liabilities and bring financial problems home.

Have you ever taken a loan? Was it a good one or a bad one?

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