Causes and effects of loans
Zhengazinova Enlika
KIMEP University
“Never cosign a loan. Once you have consigned, you cannot get out of it even on your deathbed.”- Suze Osman, financial adviser, motivation speaker, television host. A loan is a debt supplied by a person/organization to another person/organization. A rate of interest, which serves as financial compensation, is applied to this loan and repayment dates are agreed. Loans become a common thing in society, because people want to get what they want, and it has bad and good effects.
To begin with, many people take a loan to start a small business. According to Gretchen Schmid’s last statistic (2017), 371628$ was allocated for SBA 7(A) loan (Small Business Administration), which is a great option for businesspersons. Due to the fact that it has a long repayment terms. However, it comes along with a low approval rate. Based on survey by NBSA (2015), 27% of business didn’t get the loan. Taking loan isn’t an easy thing to do, as it seems.
Moreover, every student wants to get a diploma, however, not everyone can afford university studies. Due to that, there is another type of loans especially for students, named “Student Loan”. According to SLDS (Student Loan Debt Statistics) for 2012, 71% of student had loan debt. Average debt in American loan debt is 33005$ (Coleman, 2013). Without any doubt, it is a good opportunity for students from poor families.
There is no such thing in the world that doesn’t bear the consequences. Loan isn’t an exception. According to “Seventeen statistics every business owner needs to be well aware of” article, there are almost 29 million small business in United States, and they have 56, 8 million employees (Schmid, 2017). Therefore, it seems that SBA (7A) loan solves problem about unemployment. However, only one-third of business survive 10 years (Schmid, 2017), consequently, there is a bankruptcy. In addition, loans can lead to suicide. In the United Kingdom 50% of debtors on loans, commit suicide, most of them are students with Student Loan. According to research in University of South Carolina and University of California Los Angeles (2015), students are under stress of studying and working to pay high amount of money to the bank. Sometimes the loans don’t seem a solution for problems.