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May 30, 2018

Advantages of a bank loan in Kenya

Advantages of Bank Loans in Kenya Image

A bank loan enhances medium or long-term finance. Some kind of security for the loan is a requirement in most cases. Bank loans are very good for financing investments especially fixed assets. The interest charged on a bank loan can be fixed of variable depending on the policies of the bank. Bank loans can prove to be a person’s best option and there are some advantages of a bank compared to other types of loans.

Flexibility

With bank loans, you only need to worry about making your regular installments on time. Whereas compared to bank overdrafts you must pay the full amount when the bank demands it. In addition banks don’t usually monitor how you use your loan as long as you make your payments on time; hence you can invest it however you deem fit.

Cost effective

In terms of interest rates, bank loans are usually the cheapest compared to overdrafts and credit cards. The lower interest rates of bank loans hence save you money. This also ensures you can be able to make your payments in time as the rates are affordable.

Retained profits

While businesses that issue equity to raise capital often give a percentage of their profits to shareholders, banks require borrowers to pay only the principal and interest amount on a loan. As such, you get to keep all your business profits. Your business profits is hence left for you to cater for other needs that you may need as you make smaller payments on your loans.

Tax benefits

When you use a bank loan for business reasons, the interest you pay on the loan is a tax-deductible expense. This is very good as you get to enjoy some tax deductions as you pay for your bank loan.

All the above stated advantages are very valid points to consider while planning on what type of loan you could get. This depends on what type of loan you want and if you can get more advantages from other financial institutions better than banks. Also consider the amount of cash you need, the interest and the repayment terms for the loan you need. It is always wise to consider your every opportunity and do your research well before making a final decision regarding a loan.

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