Question

Since we are risk-averse, do we carry this over into business transactions? Multinational corporations are in business to make money. T However, multinational corporations have many factors to consider such as inflation, purchasing power parity, interest rates, and other qualifications. It would make more sense to borrow at higher interest rates from Brazil because when it is time to pay it back, the Purchase Power Parity for its currency is low. It would also make more sense to borrow from Brazil because if the U.S. is going to do business with them as far as importing the risk of loss due to exchange rates may decrease. The most important reason to borrow from Brazil than Switzerland would be the fact that Brazil has fewer terms and conditions. Brazil is trying to build the economy more and by having higher interest rates they can get their money back faster. Switzerland does not need the money. So, they have lower rates to attract borrows but they do not have flexible terms or conditions. No matter how many slices you make the pizza is still the same size. How can you apply this to getting loans from different loan institutions?

Answer 1

The points that we should consider before applying a loan from any loan institutions and compare them are :

1. Goodwill : We should keep in mind that we apply for a loan from a well-known and historically good ccompany.

2.Services: The company services should be good and their should be professional culture in the firm. The staff members sense of communication and handling situations should be effective.

3. Loan policies : The loan policies and terms and conditions should be less rigid. The collateral kept should be of less value so, that risk of loss should should be less.

4. Re-payment options and time : Considering the re-payment options given by the firm could be customized according to the borrower as when and at what period he want's to payback the loan.

5. Interest Rate : The rate of interest should be as low as possible so that the overall payment could be as low as possible for the borrower.

6. Rating: The rating of firm should be checked and reviews of prior customers/borrowers could help in making right decisions and helps to know the company at ground results/performance about its loan services.

7. Down-payment: The downpayment paid should be less as its the minmum payment made in order to consider the extra amount as loan. Downpayment is amount that needs to be paid immediately at the time of purchase and the left amount can be paid as loan

Amount Needed = Downpayment + Loan amount

8. Credit Score: We should check our credit score by the bank as they consider our salary, expenditure, etc in order to santion loan according to it. So, the higher the credit score they give you the more chances of getting the loan easily.

9. Inflation ,Currency exchange and Purchasing power parity : The creteria of inflation, currency exchange losses and purchasing power parity should also be kept in mind in order to get a loan. These play a nominal role but our quite big in consideration because the loan amount is obviously huge.

Conclusion: At is end, it the borrower who know what is the best option to consider he may lower the loss and expenditure but he needs to pay the loan with interest at a promised time.