Loans. For some people this word might act as a boon or a life saver while some people tend to run as far away from them as possible. Loans are a very complicated subject and how they help your wealth and financial net worth depends on your existing finances as well as money management skills. Loans have an infamous reputation of helping the rich get richer and the poor get poorer. This is starkly visible by the fact that the rich are often known to take out loans to help improve their credit score, even when they are not facing any financial crisis whereas the financially underprivileged are known to take out loans only when they are left with no other choice and are absolutely forced to. The latter is the situation that gives rise to phenomenon like Emergency cash loans no credit check.
How does taking out a loan affect your wealth?
If you do not belong to the highly privileged 1 percent of the population then chances are pretty high that you also consider loans to be something that must be taken out only during the case of an emergency. This is because if you opt to take out a loan from a formal financial institution such as a bank, then you are supposed to pay an extremely high interest rate other than the principal amount. Various studies and economic surveys have shown that people often end up paying as much as three times the principal amount, while paying off a loan, all due to high interest rates and other hidden charges. Not only this but it is extremely difficult for the financially weak to even take out a loan because of the fact that getting your loan approved and processed requires a lot of formalities and many banks have a very strict criteria.
The irony of the system is that banks often tend to provide the rich with a significant amount of wealth with a lower interest rate on their loans because of the fact that they consider them to be able to repay the loan and the chances of them going bankrupt are pretty low, whereas the poor or anyone with weak financials are often required to pay an interest rate as high as 9 percent per annum because the bank does not view them as trustworthy and in case they go bankrupt, they wish to have their money secured. This phenomenon further Increases the wealth gap.