Banks made life easier with the introduction of loans which can be accessed by any credit worthy person. There are several types of bank loans ranging from home loans to business loans which are offered by banks. Banks offer loans to people according to their credit worth. Credit worth is determined by the money in your account, the assets you own and the value of your business (es). This helps the bank determine whether you can pay off a loan and how fast you can do it.
Things to buy with a bank loan
· Shares in the stock market
· Equipment or machinery such as tractors
Loans are not paid off with the same initial amount. Banks charge you a certain percentage called interest. Interest rates change from time to time depending on certain factors of the economy. Loan interest can be payable every month or annually. A common type of loans in the world today is the house loan, commonly referred to as mortgage. Mortgage loan is generally the loan that one is given to buy a house. Your credit worth is still important in this case. The bank buys you a house which you can afford to pay interest for every month. More and more people are opting to buy homes through mortgages instead of renting the same. Why? This is because the monthly interest payable to the bank every month could be more or less the same as the rent you’d pay for the same house. The only difference here is that the loan will eventually end and the house will become yours, unlike rent where it’s a ceaseless expense.
Benefits of buying a home over renting
· Buying a home gives you sole ownership to that particular property; renting gives you partial ownership which only exists for as long as you pay the monthly dues.
· Buying a home gives you financial security in that, if unfortunately your employment or business fails, you still have a roof over your head as you continue searching for a new source of income no matter how long it takes.
· Owning your home gives you the freedom to do with it as you please. You could renovate, rebuild and replace anything you want in the interior and exterior.
· Ownership of a home gives you the sole responsibility of maintenance therefore you can have anything fixed as soon as you want.
· In the long run, buying a home proves to be cheaper than renting. This is because the house loan you pay will eventually end and the property will be eternally yours. Renting goes on for eternity since you’re just a temporary tenant in that particular property.
· With the financial freedom you experience after gaining full ownership of your home, you can invest the money you’d otherwise use for rent.
Owning a home has been made easier by the provision of these mortgage loans. This has led to many people being able to take up this process since they don’t have to save for a lifetime to own a home. Note that different banks have different interest rates on loans hence you should know all the details of a loan before applying for one.