Why the concept of Loan exists?
We really know that the resources are scarce in this world. The people in this world also have scarce resources. Everybody cannot buy everything. This life is just like spending the time in the best possible way within the available resources. The people of this world have scarce resources with them. They have limited earnings to spend on the commodities. People generally don’t spend all of their earnings. People keep some savings with them. The saving concept which we see around nowadays has been used for quite a long time. We can never predict the future with cent percent surety that is why we have to do savings to handle any upcoming difficult situations or circumstances. But all these savings cannot easily let you buy durable goods which one normally takes for maximum three to four times in his life. The concept about time loans arrived just to facilitate a business or an individual for a short period of time. Maybe that business or individual can save his business or life respectively with the amount given to them as time loans.
What are Time Loans?
As the word itself states, time loans are generally the loans given for a particular period of time. The variable which is evident in this type of loan is the time. There are short and long-term loans as well. Short-term loans are those which are particularly given for a short period of time in order to facilitate or support a business or an individual. In the other hands long term loans are those which are given for a longer period of time which means that the receiver has more leverage of time in long-term loans. Due to the difference in the amount of time, they both are differently charged. A greater amount of interest is being charged on the long-term loan while a comparably lesser amount is being charged on the short-term loan. Time loans come under the umbrella of short term loans. The interesting thing about time loans is that it is usually asset based which is repaid in a single installment only.
Advantage of Time Loans
The basic advantage of time loans is that the interest amount to be paid with the principal amount is less as compared to the interest amount paid in the long term loan. The time loans can surely give a support to you in the short period of time. As the time period to pay back the time loans is about 1-6 months and in a single installment that is why there is no huge burden on the receiver. This is not the loans of which you will have to pay the installment till you die.
Disadvantages of Time Loans
The basic disadvantage of time loans is that the time given to payback by the financial institution is very little. It just like you take a loan six months back and you have to give it today. So the borrower doesn’t have then leverage to pay back in small amount for a longer period of time. One more negative is that time loans do quickly jump on to you to be paid back.
