Impact of Loans

A loan refers to a liability that is attributed to an individual or organization in regard to financial terms. According to the law, it is valid to enforce loans. This implies that citizens of any state have a right to be granted loans to engage in economic activities.

Through the central government, institutions such as banks and other private financial institutions access loans. They ensure that people access loans at a reasonable interest to facilitate their returns. Loans are beneficial to the public and the entire economy. However, loans have limitations especially when individuals find it difficult to repay them. Positively, loans are effective when they upgrade the lifestyle of citizens and promote growth of the economy. The negative side is clear when it stops the progress of an enterprise when the business fails to prosper.

For a business to succeed, funds are mandatory to boost its internal procedures. Loans benefit stakeholders and members of a business by providing them with capital to promote their activities. Additionally, this form of cash is essential to support business ventures. Evidently, the positive impact that loans have on lives of people is when it offers them funds for mortgages. They enable individuals to secure houses in spite of their financial standards (Silipo, 2009). Leaners also gain assistance from student loans to upgrade their levels of education.

Loans that are invested in business enhance the growth of the economy. As much as these loans facilitate development in economy, they are also difficult to repay. If plenty of individuals borrow funds from government and fails to pay back, this subjects a country to bankruptcy. On the positive side, loans are effective because they facilitate growth in economies. There is also need for the government to regulate loans and advance the economy.

References

Copelovitch, M. S. (2010). The International Monetary Fund in the global economy: Banks, bonds, and bailouts. Cambridge: Cambridge University Press.

Silipo, D. (2009). The banks and the Italian economy. Heidelberg: Physica.

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