The pros and cons of bank loans that you have to know

Borrowing money is one of the best way to get yourself out from financial problems momentarily, and it is also a huge responsibility that you have to fulfill knowing that the money you spent on different things that you believe is important should be paid back according to the terms and conditions that you have agreed on, and banks are very strict when it comes to loans.

People loan money for various purposes; it could either be for personal, for investments, or for businesses, depending on their financial plans using the money that they cannot raise themselves which opted them to borrow money from a bank.

Usually, banks and other financial institutions can provide you various types of loans with terms and conditions applied, but despite all of the good things that banks always tell you, there are some hidden pitfalls that they are not telling you which might ruin your loaning experience.

With that being said, here are some of the most notable pros and cons of bank loans that you have to know.


  • Flexible terms- Because of bank loans you worry-free from making your regular installment payments on the due date because of overdrafts which is a notable advantage of bank loans, where you have to pay the full amount when the bank demands it and to add more, banks usually monitor how you use your loan as long as you pay it on time, so that you can invest however you prefer it for your own convenience and benefit.
  • Reasonable interest rate- Interest rates in bank loans are usually the cheapest option between overdrafts and the credit cards because the average fixed interest rate for credit cards has surged to 17.49 percent while the certain bank-provided loans guarantee you by the Small Business Administration which have rates that range from 7.5 to 10 percent, while the lower interest rates of bank loans meanwhile can definitely save you a lot of money.
  • Profit retention- If you are using the bank loan for your business, this issues equity in raising capital which usually has a given percentage of the profits to the shareholders while banks also require borrowers to pay only the principal as well as the interest amount of the loan, and as such, you can freely retain all your business profits without any worries.


  • Strict requirements- Bank loans require its applicants’ collateral as well as startups and an existing business that can be used as collateral and if you do not have any assets that can be used as collateral, you are instantly not qualified for a bank loan knowing that the amounts that you can avail in bank loans are relatively big amounts of money.
  • Monthly payments- The majority of the loan borrowers have to make periodic payments to the banks that they borrowed. Those who fail to make the payment are potentially facing the seizures of the assets placed as collateral. Even if you are able to make late payments, your bank will report you to the credit bureaus that will surely affect your credit scores.
  • Seizing your assets- Knowing that the collateral that you leveraged to the banks are your assets, if you fail to pay the amount you loaned from them, chances are that the assets will be seized by the bank as a form of payment unlike applying for a bad credit loans in Alabama.