Posted on October - 08 - 2009

Loans Are Getting Better

The word debt is a depressing word. When you hear the word debt, it kind of fills your head with visions of mountains of bills that come like clockwork at the end of the month or debt collectors knocking down your door. On the other hand, a loan, sounds more reasonable. Let’s admit it; a loan is also a debt. But a loan sounds more reasonable, and more manageable. This is especially true for loans that are made with reliable sources such as credit unions, banks, and loan companies. It is best advised to ignore loan sharks as they may collect you out of house and home.

Okay, onto the nitty-gritty things. Say I want to get a loan because I want to put up my own rabbit raising business. I would need capital to buy my rabbits, lease a place where I can raise them, buy materials for the pens where they would live, and also buy food for them. The nice person at the bank explained this to me. He said that I am now called the borrower and the bank would be the lender. Okay, got it so far. Next, as a borrower I would then borrow an amount of money from the bank. This amount of money is called a principal. This is the first part of the loan. The next part of getting the loan is that we have to reach an agreement on the time frame in which I would have to pay back this amount of money. He explained to me that I could pay back the loan in installments. These are partial payments of a reasonable and manageable fraction of the amount of the loan until the loan is fully paid for. At this point I need a moment to take this all in but he told me there’s more. A crucial part of the loan is the interest. This interest is like an additional payment to the lender because he was nice enough to loan me money for my rabbit raising business. I must admit, this sounds reasonable. I have heard horror stories though of interest rates going sky high and making it impossible to pay for the loan. To further reassure me, he produced a loan contract which contains everything he explained to me albeit in a more professional sounding manner.

But wait, there are things that are required of me before I get the loan for my potentially hugely successful business plan. The nice bank man told me that before I get my loan approved, I would need to give them a copy of my credit to show them that I have been responsible and good in my financial obligations. They said that I also need to show them my business plan to convince them of the soundness of it. Well, I can tell you this is well thought through. I have visions of cute bunny rabbits and I am positive that I can have a lot in just a short period of time. Rabbits, here I come.

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