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Financing Options - Essay Example

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Therefore, the financial system of the economy is very strong and facilitates the institutional and retail investors of the economy with a large number of options for large purchases such as house purchase, lease, bank loan and…
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Financing Options
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"Financing Options"

Download file to see previous pages 41, No. 3, 2001, pp. 121-140). In this paper, various financial options available in the UK economy for large purchase will be evaluated and the issues associated with such options will also be analysed.
Bank loans are considered to be the most reliable source of financing any large purchase. Bank loan is an agreement in which the borrower is provided with full or partial amount of the money required for purchasing certain assets from a large number of commercial banks such as HSBC, Barclays, Standard Chartered and Royal Bank of Scotland as well as cooperative banks such as Tesco Bank, Sainsburys Bank etc. available in the economy. Such sum of money is provided with an agreement of repaying the principle amount after completion of a stipulated period of time. Moreover, the borrower is subjected to pay the fixed or variable amount of interest rate, as applicable, on the principle amount taken as loan (M. Caglayan and A. Rashid, “The Response Of Firms Leverage To Risk: Evidence From Uk Public Versus Nonpublic Manufacturing Firms”, Economic Inquiry, Volume 5, No. 52, 2013, pp 341–363).
Bank loans can be of secured and unsecured. Unsecured loans are those source of capital in which fund can be quickly availed without any obligation of collateral. Such loan is provided, depending upon the current financial position of the borrower and his reputation in the market. However, in case of large purchases, loan is always made secured by involvement of certain assets such as housing property of the borrower which is used as collateral. The lenders hold the collaterals till the tenure of the loan. If the borrower fails to repay the loan or the interest payment within the stipulated time, the banks are entitled to acquire the right of ownership of the collateral. Secured loan is considered to be the best option for accumulating large amount of money. Mortgage loans are the most prominent example of secured bank loans (I. K. Nassr and G. Wehinger, ...Download file to see next pagesRead More
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