Have you ever been caught in a financial dilemma where you need a loan to fix a situation? How much of these cash advance facilities have relieved your financial burdens?
Though these cash advances can serve as a quick relief, especially in dire financial cases many of them are laden with hidden clauses and nerve-racking bureaucracies that make this process tedious and repayment cumbersome. Most of these loans are facilitated by financial institutions such as banks and credit card companies while some others are being provided by individuals and thrift collectors.
How much of this financial quick-fix remedy has been as reliable as alleged?
How have these momentary palliative measures sufficed in the face of tough times?
loans, as much as they tend to provide an outlet in times of distress, there are many sides to this cut-throat generosity that are offered by these loan facilitators and the overwhelming impact on the borrowers is what we intend to analyze in this article.
Firstly, we are going to shed light on the meaning of the word ‘‘loan’’ in all its entirety as this perspective will equip you with all the information about the loan.
What is loan?
A loan is a sum of money, item, or property that is given by a lender to a borrower. The recipient of this loan is liable for repayment within a specified duration as agreed and signed by both parties and in this case which is the borrower and the lender.
There are different types of loans, and these are
- Personal loan
- Mortgage loan
- Student loan
- Auto loan
- Payday loan
- Pawnshop loan
- Small business loan
These are loans that are taken for the facilitation of personal expenses. They are sourced from either financial institutions or individuals and thrift collectors as earlier mentioned at the beginning of this article.
Personal loans can be sourced through banks, online money lenders, and credit unions. Some examples of personal loans are
- Debt consolidation loan
- credit builder loan
- Home improvement loan
- Holiday loan
- Vacation loan
- Medical loan
- Recreation vehicle and boat loan
- Wedding loan
- Family loan
- Pool loan
These are loans that are used to acquire properties such as homes or real estate properties. The acquired property is used as a form of security for the loan because the house or property serves as the collateral. The cost of a mortgage loan is directly proportional to the type of loan taken, the duration of the loan, and the interest rate.
These are loans that are acquired to provide financial assistance to students in college. A student loan can be taken to aid tuition fees, accommodation, and purchase of learning aids and materials amongst others. These loans are divided into
- Direct subsidized loans
- Direct unsubsidized loans
- Parent PLUS loans
- Graduate PLUS loans
- Direct consolidation loans
- Private student loans
- Private parent loans
Auto loans are also called car loans, and these are financial measures used for the procurement of a car or automobile. This loan can be procured through any of the loan facilitators and processed at the point of a car purchase or further arrangement with the car dealer.
Payday loans are unsecured loans that are offered by lenders to a borrower and the recipient in agreement with the lender makes a promise to repay the agreed sum when they collect their next salary or wages. These loans are often laced with interest rates that are alarmingly high with affixed short-term repayment plans.
This type of loan is offered by shops that trade-invaluable items or goods of great worth for money. These loans are short-term as the pawned items can be recovered at the point of loan repayment, which is always within the shortest possible time.
Small business loan
The need for business funding especially for startups has led to an increased demand for small business loans. Most of these businesses are plagued with a lot of financial burdens at the early stage of operation. Supplementing operational costs to the acquisition of basic working materials has compelled a large number of these business owners to seek for external funding to finance the operational needs of their businesses.
Small business loans are financial assistance that promotes and strengthens the efficiency of a business
Going further on this topic, furnished with the information garnered from the type of loans, we are going to critically look at the shadow lurking behind these loans. Are they as savory as the menu presents? How have these loans shaped the lives of the multitudes thronging these loan facilitators?
The dark sides of loan – a horror that is better imagined than witnessed
Imagine a scenario where a lifeguard comes to the rescue of a drowning victim. It is a relief that comes at the right time, nothing can equate to the life-changing moment this opportunity presents to the victim.
These loans are packaged as financial relief that promises a way out of financial burden but many of these loan facilitators has turned the generous offers into subtle treasury where they employ unsavory methods to retrieve the loans.
Several of these loan facilities are crawling with loan sharks clad in shylock garb. They take more than what is offered thereby launching their customers into a life that is riddled with untold hardship.
Here are some of the dark sides of loans
Loan covenant entanglement
Loan covenants are contractual agreements between a lender and a borrower. This agreement captures the terms and agreement attached to the policy. It is done to enhance the security around the loan and provide clarity to the borrower.
Most of these loan facilitators have been known to attach or hide clauses that might affect the chances of repayment. This has led to difficulty in loan repayments and severe cases, the forfeiture of assets.
Lack of flexibility structure in loan repayment
At the point of loan disbursement, the terms might appear easy and appealing, but the repayment plans are not as flexible as portrayed hence leading to issues and failure in loan repayments.
In the case of secured loans where the collateral is often required before loans are disbursed, the property used for collateral is used as a security against the loan. Several of these loan institutions are not lenient when it comes to loan repayment, and many have been compelled to forfeit assets worth millions of monies due to failure in meeting up with agreed repayment plans.
Unreasonable interest rates
This is the main bait for many loan institutions as this is the main source of dividends for them. Borrowers, embroiled in financial situations are often forced by circumstances to make impulsive decisions such as loan acquisition to take care of specific needs. Saddled with money troubles and unfazed by the interest rates regardless of the amount are quick to jump on the bandwagon of these loan facilitators and, after a while, wake up to the hassle involved in the repayment of these loans because of the high-interest rates.
In summary, this article is not dissuading the acquisition of loans in any way but brings to bear the disservice that is associated with these loan acquisitions when things do not go as planned, especially the borrower not being able to repay the loan.