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Why do you get a loan?

Amanda Johnson

in Student Loans

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Justin Parker on June 7, 2018

With the purpose of obtaining a loan is when you need something, but currently lack the funds to purchase. If you get approved for a loan, the bank gives you the money and you agree to be paid within a certain time payments, and with interest. The interest is essentially a fee you pay to get the privilege of borrowing. The banks lend money so that they can make more money. Typical things that people use loans for the purchase includes vehicles, land, houses, boats, college education, etc, banks can have some control over what they purchase, and may require you to have insurance on the items. The reason for this is that if you fall behind on payments and have to take ownership of what that is, then the item or property will be in good shape for resale, or would have to be able to collect the insurance. So if you borrow to buy a car, not only would you need liability insurance as is required by law to operate the vehicle, you will need collision coverage as well. That way, if an uninsured driver hits you and totals the car, while the car is still property of the bank, the bank will not be what they lent in case of default on the loan.

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