Loans and insurance policies in the US are indeed worth the money. Below are reasons to crown that fact:
- Protection for Family:
Life insurance protects the family after the death of the bread-earner. When a person dies at an early age, the family loses its source of income. The family is paid the amount of the policy. This money can be used to create some other source of income. So insurance is beneficial for the family.
- Encourages Savings:
The insurer is required to pay a premium at regular intervals. It encourages people to save money for paying a premium. If the premium is not paid the policy will be canceled. Insurance helps create the habit of saving money.
- Channel for Investment:
Life insurance not only protects against future risk but is also a good source for investing money. The insured get lump sum money on the maturity of the policy. In case of death, the nominee of the insured gets the money. The case of life insurance is different from marine and fire insurance because in a life insurance policy money must be paid sooner or later. In marine and fire insurance only the loss is compensated.
- Exemption from Income Tax:
The amount paid as a premium on a life insurance policy is allowed as a deduction from income for calculating income tax. The insured can save some income tax.
5. Helps in Capital Formation:
The insurance company can collect huge sums of money as a premium. This amount is invested in various developmental activities of the country. It is a good source of capital formation.
6. Credit Facilities:
The insured can raise a loan on the security of the life insurance policy. The insurance company extends financial help on the security of the policy.
7. Helpful in Education and Marriages:
An insurance policy can help provide funds for educational purposes and marriages. The policies are purchased for such a time that they mature at a time when money is needed.
8. Policy can be Surrendered:
A life insurance policy can be surrendered if the insured is unable to continue it. Sometimes, the insured is not able to pay the premiums after some time. The insured is returned a certain percentage of the premium known as surrender value.
9. Helpful for Partnership Concerns:
Partnership concerns can have joint life insurance policies on the lives of all the partners. In case of the death of any one of them, the whole amount of the insurance policy is paid to the firm. The firm can pay out the share of the deceased partner without affecting the working capital of the concern.
Loans are one of the basic building blocks of the financial economy. By giving out money with interest, lenders can provide funding for economic activity while being compensated for their risk. From small personal loans to billion-dollar corporate debts, lending money is an essential function of the modern economy.
Loans are advanced for several reasons including major purchases, investing, renovations, debt consolidation, and business ventures. Loans also help existing companies expand their operations. Loans allow for growth in the overall money supply in an economy and open up competition by lending to new businesses.
The interest and fees from loans are a primary source of revenue for many banks, as well as some retailers through the use of credit facilities and credit cards
However, what processes go through to get it is worth the money and this is further buttressed by the following factors
- Consolidate debt
Consolidating debt is one of the most common reasons to borrow a personal loan. According to a 2022 LendingTree study, debt consolidation was the most popular reason to apply for a personal loan among consumers with excellent credit.
Debt consolidation involves rolling multiple debts into a single personal loan. This approach can make sense if you’re able to secure a low-interest rate. If you repay your other debts with the money from a personal loan, you’ll only have one fixed monthly payment and you might be able to save money on interest.
The average APR on a 24-month personal loan was 8.73% in May 2022 — the latest data available from the Federal Reserve — while the average interest rate on all credit card accounts is 15.13%.
A personal loan for debt consolidation could also help you:
- Extend your repayment term
- Lower your monthly payments
- Free up more of your income to cover necessary expenses
- Business Expenses
Some business owners use their home equity to grow their businesses. If you have a business that requires more capital to grow, you might be able to save money on interest by taking equity out of your home instead of taking out a business loan.
Before you commit to taking this action, run the numbers on your business. As with using your home equity to purchase investments, a return on investment in a business isn’t guaranteed.
Why use home equity for this: You might be able to borrow money at a lower interest rate with a home equity loan than with a small-business loan.
Insurance has evolved as a process of safeguarding the interest of people from loss and uncertainty. It may be described as a social device to reduce or eliminate the risk of loss of life and property.
Insurance contributes a lot to the general economic growth of society by providing stability to the functioning of the process. The insurance industries develop financial institutions and reduce uncertainties by improving financial resources.
- Make a large purchase
You can take out a personal loan to finance a large purchase, but that doesn’t mean you should borrow money to get a new entertainment system, patio set, or car. Some large purchases are necessary, such as suddenly needing a new major appliance.
While you can use a personal loan to buy a car, it’s typically preferable to apply for a traditional auto loan, since they usually have lower interest rates and easier qualification requirements.
On the other hand, auto loans require collateral, which means you could lose your car if you fall behind on payments. It’s a good idea to compare rates, especially if you’re worried about risk.
- Financing education
Home equity loans are becoming a popular option for funding education because the interest rate can sometimes be lower than student loans. You also have the potential to borrow more. This gives many families an easier way to pay education expenses for multiple family members.
It is important to note that some parents may not want to finance their kid’s education if it would harm their overall financial security. Using home equity to fund education may be a good idea for some, but it can be perilous if you’re approaching retirement.
- Pay for Vacation
While taking a trip somewhere can be exciting, travel can be expensive. Between plane tickets, gas for your vehicle, food, shopping, hotels, and activities, a vacation can quickly feel unaffordable.
In California, the average fare for a ticket out of Los Angeles International Airport in early 2022 was $331.70, according to the Bureau of Transportation Statistics. At the Chicago-O’Hare International Airport, it was $333.44.
Vacation loans can ease some of the financial burdens of having to pay for a trip upfront and instead divide it into monthly payments.
6. Life insurance encourages savings:
Insurance does not only protect against risks and uncertainties but also provides an investment channel too. Life insurance enables systematic savings due to the payment of regular premiums. Life insurance provides a mode of investment. It develops a habit of saving money by paying premiums. The insured get the lump sum amount at the maturity of the contract. Thus life insurance encourages savings
- Finance funeral expenses
When someone dies without leaving behind sufficient funds for funeral costs, it can put an unexpected financial strain on the surviving family members.
The median cost of a funeral with a viewing and burial was $7,849 in 2021, according to the National Funeral Directors Association. Many consumers won’t have enough saved to cover that cost all at once.
A funeral loan could be an idea if you’re struggling to cover the cost of a funeral. You may even be able to get a funeral loan with bad credit.
- Help cover moving costs
Another idea on the list of loan purposes: covering moving costs. There are many scenarios in which moving loans may make sense:
- You don’t feel safe in your current environment
- You’re separating from your spouse
- You need more space for a child on the way
A job offer in another location can be another good reason to move, but you should consider carefully whether your new income and cost of living will make it possible to repay your loan.
- Cover a major life milestone
Whether you’re getting married, going on a honeymoon, or thinking about adoption, a personal loan can put these ventures within reach.
Choose carefully from all the available options.