My Profile

Profile Avatar
91 Square De La Couronne
Paris, CENTRE 75001
France *******
Banks and Finance Companies are both in the business of lending funds to businesses and individuals. Banks may accept deposits from clients, and Finance Companies from internally sourced funds such as stockholders and investors. Since the banks hold on to other people's money and promise to pay the depositors interest, the banks have access to wider sources of funds. They may invest the depositor's funds and make income from other people's money. For Finance Companies, on the other hand, they generate their funds from their stockholders or owners and somehow solicit private investment from other individuals. These investments come with a contracted interest that the Finance Companies need to pay on a perpetual basis, and principal to be a balloon payment at the end of the investment term.
So you see, the different cash provided for you to borrow have COST. The interest charged depends on the kind of funds available to these institutions. Hence, this also dictates how far they may accommodate you on your loan application, to a point that you shall come out of the deal satisfied.
And these institutions are competing for your uk loan application or your business! They offer terms of good value to you. One of these terms is to stretch the amortization or number of regular payments to include interest and principal factors.
So how does stretching your monthly payments help you in your budget? The longer the amortization period or the loan period, the lower your monthly payments. For example you borrowed Php10,000 pesos and your term is 10 months, you should be paying Php1,000 per month. If the term let say is 20 months, then you should be paying only Php500.00 per month. In this example, the result of a longer term is actually easier on the Take Home Pay, allowing you only to shell out Php500 and still keep the other expenses covered. Not to mention, you already received the proceed of your loan to be Php10,000 that has covered your tuition expense at this point.
The Finance Companies have an advantage in stretching the amortization. Finance Companies can even provide you with broken terms of 3 months, 5 months, 14 months or even 12 month and a half for some, that somehow adjust the amortization pay just right for your budget. In this regard, whether you choose a bank or a Finance company, make sure you compute for the amortization and check your budget if it fits.