PROS AND CONS OF BUSINESS LOAN AND AN OVERDRAFT

Advantages and disadvantages of a business loan

Obtaining business loans is not a spontaneous decision. There are many considerations to consider before making this decision. A person can obtain business credit for various reasons, as it seems the most profitable option when investing with a larger amount and for a longer period of time. Also, most banks and NBFC offer fixed-rate loans that allow a person to have a good understanding of the short-term repayable amount.

Here are some of the reasons a person might consider getting a business loan:

1. Borrow a larger amount for a longer period of time
2.  The interest rate can be set for the life of the loan.

The disadvantages of a business loan are as follows:

1. The higher interest rate on loans for personal use with a small amount.
2.  It is possible to request secured loans with larger amounts. However, valuable assets can be promised for this. The risk of such investments is that if the loan is not repaid within the specified time, the asset may be lost.
3.  Loan repayment is not very flexible because the criteria are set by the lender, which is the bank or financial institution.

Advantages and disadvantages of choosing an overdraft service

The choice of an overdraft service depends on the financial needs of the person.

Some of the benefits or advantages of an overdraft service are:

1. There are flexible loan and repayment options.
2.  The borrower is free to determine the amount of money to be paid each month.
3.  Overdrafts are a relatively cheap option for obtaining short-term loans because interest may not be charged.

Some disadvantages or disadvantages of using an overdraft service are:

1.  The amount of money withdrawn is less than that of a loan for personal use.
2. Interest or overdraft fees can be charged more and even more if the agreed limit is exceeded, making loans very expensive.
3. Both financial products have their own advantages and disadvantages that are available to the customer. With minimal documentation and a hassle-free process, clients can take advantage of whatever credit service best suits their needs.