9 Lessons Learned: Services

Health Care & Medical

Importance of Not Giving Loans With Bad Credit.

Loans can be described as money which is given to a borrower on an agreement basis with the debtor and the creditor. The financial institution is first given the task of assessing the validity of the loan before giving it out to the interested party. After making a judgement on the reasons presented for the loan the financial institution then decides whether to give the loan or not. The financial institution should already have made known to the borrower their terms and conditions governing the whole process upon which the determination is then made. Bad credit history is exhibited by ones financial history and which should be considered before the financial institution accepts to be involved with the current borrower. The borrower who is seen to have cleared all previous loans on time is seen to be in a better position to clear the loans on time. A new borrower can be accepted for a loan based on the number and amounts of deposits they have made over a considerable duration of time.

Poor financial planning results in bad debts. The major aim of borrowing money from any institution is eventual profit from its investment, but this cannot be achieved with poor planning. The eventuality of this is that their loan payment will be delayed which may at times become difficult to settle them leading to bad debts. The financial institution should thus be in a position to assess when someone is borrowing their money in order to know the validity of the project they want to be involved in.

Financial institutions are charged with the responsibility of ensuring there is proper security for loans they are about to render. There have been cases of dishonest persons who have in the past given a wrong record of their security to get a loan. Since the fraudsters have no aim of paying back the money and there is no proper security tied unto them the institution ends up incurring heavy losses. The bank should also be able to verify the identity and ability of trustees provided by the loan owner. Trustees are defined as persons who are in a position to come in and help settle a loan in case the borrower is not able to. Before their engagement the trustees should have met all the given requirements.

Some financial institutions can be termed as young financial institutions. This is because they have not yet developed fully to a level of taking major risks of offering huge amounts of loans. The size of their capital base is still small and hence they are not in a position to withstand delayed payments for too long. Keenness is required when handling borrowers in order to avoid such bad debts.

Lessons Learned About Loans

The Path To Finding Better Funds