Advatages of formal credit briefly answer
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The advantages of a formal loan is that the bank or credit union who is granting the loan, has minimum chances of suffering financial loss because of nonpayment or because the customer committed fraud.
The credit union or bank may have a collateral to back up a nonpayment in case something happens that would rend the customer unable to pay.
The customer can rest assured that the money he was lend is legitimate and there are no risks later on that the money came from a fraudalent and corrupted financial company.
The bank or the credit union are able to grant a large amount of money in loan for a customer.
The customer will pave the way to build a strong credit history of worthiness which will open the doors in many places in the future if he pays the loan successfully.
Some of the disadvantages of a formal loan:
The requirements are exessive, take longer to be completed than those from an outside financial agency.
Many formal loans require the customer to have a cosigner sign the promise notes and the bank letters. The cosigner is putting his reputation and credibility at risk and also once the customer fails to pay the loan then the cosigner’s credit file will be ruined as well.
The banks can be greatly impacted financially when formal loans become a loss of money because the borrower fails to pay back.
The customer’s credibility, reputation and credit worthiness will go down completely once he fails to pay the formal loan and his name will be reported to the credit bureus and to the Chexsystems. His credit file will become negative and the consequences would similar to a bankruptcy filing.
The advantages of a formal loan is that the bank or credit union who is granting the loan, has minimum chances of suffering financial loss because of nonpayment or because the customer committed fraud.
The credit union or bank may have a collateral to back up a nonpayment in case something happens that would rend the customer unable to pay.
The customer can rest assured that the money he was lend is legitimate and there are no risks later on that the money came from a fraudalent and corrupted financial company.
The bank or the credit union are able to grant a large amount of money in loan for a customer.
The customer will pave the way to build a strong credit history of worthiness which will open the doors in many places in the future if he pays the loan successfully.
Some of the disadvantages of a formal loan:
The requirements are exessive, take longer to be completed than those from an outside financial agency.
Many formal loans require the customer to have a cosigner sign the promise notes and the bank letters. The cosigner is putting his reputation and credibility at risk and also once the customer fails to pay the loan then the cosigner’s credit file will be ruined as well.
The banks can be greatly impacted financially when formal loans become a loss of money because the borrower fails to pay back.
The customer’s credibility, reputation and credit worthiness will go down completely once he fails to pay the formal loan and his name will be reported to the credit bureus and to the Chexsystems. His credit file will become negative and the consequences would similar to a bankruptcy filing.
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