by Costas Chryanthou

Created on: December 24, 2009   Last Updated: December 25, 2009

Loans are debt instruments that people can either take out for home improvements, car loans, loans against the value of houses, as well as other measures to increase the level of money a person has coming in to his or her bank account to spend. Though as with all types of debt instruments these loans have to be repaid back to the bank with interest. Loans can act as a good way to improve the value of a persons property if the money is invested and spent wisely. If the house improves in terms of features and character as well as aesthetic condition the rise in the value of the property might be greater than the level of loan amount taken up.

Loans are dangerous for a number of reasons most of which are down to affordability and the persons ability to repay the debt back. The dangers are that by delaying debt repayment that a person could have his or her property taken away by bailiffs. Other dangers for not repaying debt on time include a poor credit rating, or a lower credit rating which also determines what rate of interest a person has to pay in future times when debt is needed to be raised.

Other dangers of loans could include mental health issues such as added stress and inconvenience to members of the family who are in danger of losing property as well as having a high burden of debt that has to be repaid. In this case a family is at risk if they decide to have large amounts of debt that they can not afford to repay. The danger is people can get divorced, lose there motivation at work due to the higher level of stress and burden that has been put into place by borrowing excessive amounts of money.

The danger or risk that are caused by loans are that some loans offer a high or extremely dangerous level of interest that must be paid each month on a loan. The repayment schedule also may be to soon that puts the ability of a loan account holder in danger of not being able to pay up on time or the repayment schedule maybe too much for a person to be able to repay for a certain number of years. Loans such as pay day loans as well as pawnbroker loans charge high rates of interest that are short term and the problem starts if the person can not pay on time. People can face having their possessions taken away or be in serious trouble for missing even one payment.

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