How To Avoid Paying Interest On Loans.

Interest payments on loans are one of the painful decisions to make.

Unfortunately, only a few sources of loans are offered without interest payment.

Teaser: An opportunity to make good use of workplace mutual fund loans. An individual gets to even receive or spend the interest he or she would have paid.

Interest payments are major components of any loan transaction. It is for this reason, loans are rarely offered without interest. While

interest components, which are mostly on a compound interest basis from financial institutions which are not traditional banks, can be a reason an individual will struggle to pay off loans. Interest can also be the reason a person will stay off loans.

Interest payments on loans can be avoided provided an individual can project his personal financial needs into the future to cover the duration of the loan term. The interest payments on loans, therefore, can not be avoided when the purpose of the loan is to solve an emergency situation.

An interest on loans can be avoided while helping a relative or a friend to own his own project and thereby creating jobs and reducing employment.

Individuals who can forecast their situation can identify a project that could bring in revenue regularly and can pay the regular loan installment repayments. Examples of projects include buses, tricycles or motorbike transport, known as ‘Bodaboda’ in Kenya or ‘Okada’ in both Nigeria and adopted in Ghana. The first individual who needs the loan could then engage another person who is ready to own such a project but lacks the initial capital to undertake such a project. The original individual who needs the loan may or may not need to brief the person being brought on board that he or she needed the loan in the first place. An agreement could then be reached for the person being brought on board to pay the regular installment loan repayment amounts, on schedule to the person who afforded the loan, to eventually own the project after successful repayments. A win-win situation is therefore attained.

This type of arrangement is different from a situation where the primary person owns the project and employs another person to operate with the hope that the project can help repay the loan. The main reason why allowing the second person to own the project after repayment is that the second person would have a personal or selfish interest to work for which could greatly influence the success of the arrangements.The person who originally needed the loan gets to avoid the interest payments on the loan and even gets to receive or spend the interest on the loan, since the transaction between the two individuals now is as though the original person loaned the amount to the second person. The second person also gets to receive initial capital to start a project that he or she could not afford. The second person gets to own the project after he or she completes the repayment of the loan.

Management skills by both parties to handle or operate the project is the foremost challenge. The project, however, has the tendency to create jobs for relatives or relatives and contribute to the reduction of unemployment in countries. Also, this arrangement, when entered into by close relations, can boost the financial position of the family and reduce the financial demands on the few regular income earners, since those who are unemployed in the family chain get to become productive.

This arrangement is best suited with loans taken from sources with cheaper interest rates like workplace mutual funds. Cheaper interest rate sources would afford the second person the opportunity to repay the loan without stress and could even repay the loan earlier. Though trust issues can be a worrying concern, registering the business in the original person’s name, which would only be transferred after repayment, can mitigate some levels of mistrust in the arrangements.

See also 4 institutions to take loans from or never

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