The Business Of Loans

The procedure of taking a certain sum of money from another individual or organisation with the promise of repaying the principal along with interest and any other fees or charges is called a loan. Payday Loans are offered by banks and other financial organisations and it is one of the main sources of income for them. Payday Loans can also be obtained from private financiers, however, private entities may charge a higher rate of interest and their loan terms at times are a little harsh on the borrowers.

Difference in Procedure 

Private financiers may give a loan if they are given a collateral security like immovable property, land, building etc. However, they would give only a small percentage of the property’s value as loan and if the loan is not repaid in time, they will acquire the property mortgaged with them. Banks will also keep a collateral security but provide a loan primarily based on the borrowers income level and repayment ability and not value of the mortgaged property. Additionally, a loan taken from a bank provides can be paid in monthly payments called EMI (Equated Monthly Installment) which includes interest and part of the capital. Most private financiers however keep collecting only the interest every month till the capital is not repaid.


Tax Benefit

A loan taken from a bank can be shown on the annual tax returns and some part of the repayment is tax exempt. However, repayment for a loan taken from a private entity does not entail any tax benefit. One can check benefits at

Which is better?

Generally bank loans are the safer option. Taking loans from a bank can be a lengthy process since the regulations and formalities could be time consuming. Additionally, a bank may not be willing to provide the amount the borrower requires. A private financier will process loans faster and also give a higher loan amount depending on the value of the mortgaged property. However, banks provide loans at lower interest rates.


Irrespective of who you choose to borrow from, there has to be planning and proper financial management else you could end in a financial mess.

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