A loan is when an individual borrows money from a bank, friend,
relative, or organization with the promise of paying interest alongside capital within the future. Capital is that the actual money that the person has borrowed and therefore the interest is that the person has got to pay some extra cash to the borrower thereon money.
Debt usually depends on three factors – capital, interest, and therefore the term of the loan (i.e. what percentage days you’ve got time to pay the loan interest).
Many folks wish to take loans from banks or any reputable institution. Because the loan is out there within the bank in accordance with the govt regulations.
Loans are generally of two types supported the safety provided
(1) Secured loan
(2) Unsecured debt
Secured loan-
To get this sort of loan you would like to offer some mortgage
as security like gold jewelry, house paper, etc. If you’re unable to repay the loan on time, the bank is going to be entitled to
hide the deficit by selling the mortgaged item. The rate of
interest on secured loans is far less than the rate of interest on
unsecured loans.
Unsecured debt-
You do not need to pay anything as collateral to require this sort
of loan. during this case, the bank will decide whether to offer
you a loan after checking your credit score, relationship with you,
your source of income, and a few other things. during this case,
the rate of interest could also be a touch higher because the bank
won’t keep anything from you as security.
Type of purpose-based loan
Personal loan
Usually, all kinds of banks have personal loans. The specialty of
a private loan is that you simply can spend this loan as you would
like. This loan you’ll spend for travel, on your own luxury, for
purchasing on a sensible phone, for old loan interest, for
emergency treatment, home furniture, etc. you’ll also take this
sort of loan together with your own MasterCard. this sort of loan
also can be obtained from a bank showing your credit score.
Educational Loans-
This type of loan is typically taken by students for education.
education can include a baccalaureate, an academic degree,
or a diploma certification course from a reputable institution or
university. For this, you would like to organize the admission
papers with the bank. This loan is out there for both domestic
and international courses.
Home loan-
Home loans are usually used for building houses, repairing
houses, buying land. during this case, the property will remain
under the lender and therefore the owners are going to be
transferred to the rightful owner after repayment of the loan.
Vehicle loan-
This loan pays for the acquisition of two-wheeled and
four-wheeled vehicles. you’ll use this loan to shop for a
replacement or an old four-wheeler. The loan amount is decided by
the lender supported the on-road price of the car. However, you’ll
get to have some extra cash for the deposit as 100% of the cash
isn’t available on this loan. The car will remain owned by the
lender until the loan is repaid fully. you’ll buy a two-wheeler
with 5% to twenty deposits.
The implementation of the new policy on the classification of
loans have revealed the extent of defaulting loans within the
banking industry of Bangladesh and therefore the serious
problems related to it. It is often seen that the MasterCard
of the banks and its quality is at a really low level. during
this situation, the state-owned banks reduced the quantity
of defaulted loans and have become active in increasing
the standard of assets and improving the economic condition.
Under the new arrangement, banks are prevented from showing
artificial profits by calculating unpaid accrued interest on
overdue loans. The new debt arrangement has begun to guard
banks from certain bankruptcies by warning them of bad debts
and bad loans.
Bangladesh Bank introduced a revised policy in December 1994
to upgrade the credit classification process to the international
level. The implementation of the new arrangement was
completed in five different phases by December 1997.
The loan period for classification in the Tun method is greatly
reduced as compared to the previous period and therefore the
level of classification is increased. Banks got new guidelines in
December 1997 to facilitate the loan classification process. On
the opposite hand, Bangladesh Bank issued instructions to spot
the loans given within the new system under 4 different names.
As per the instructions, differing types of loans need to be termed as ongoing loans, call loans, term loans, and short-term
agricultural and microloans.
It usually took an extended time for a loan to be classified. As a
a result, the thought of classifying loans has not gained much
importance during this country. As a result, most of the loans
given by banks become non-performing and unpaid and that
they face huge capital deficits. Over time, the whole banking
industry of the country became incapable of paying its dues and
as a result, it became impossible to hold out future activities.
during this context, supported the recommendations of the
Bangladesh National Commission on Money, Banking and
Credit and therefore the International Bank for Reconstruction
and Development, the govt undertook a comprehensive
program to reform the financial sector. As a part of this reform
the program, in November 1979, a replacement method of
classifying loans and rules for preserving savings from the
profits earned by banks on potential non-performing and
loss-making loans were introduced.
We carry a private loan or consumer loan to satisfy urgent
cash needs. However, it’s vital to gauge the conditions before
taking a loan. it’s necessary to understand what the value of the
loan is, what’s the term, what’s the late payment fine, etc.
Most financial institutions check out a borrower’s credit score
before making a loan, which determines their creditworthiness
and repayment amount.