Reference no: EM133021095

Question - The Business Partners by Aya - Two brothers are planning to establish a café restaurant. Bien is fond of coffee while Bryan is fond of pastries. Both have contributed part of their savings but upon the assessment of the values, they need more capital. The amount needed is Php 500,000.00, and they decided to divide it equally.

Bien plans to get a policy loan of Php 100,000.00 from his life insurance and apply from a microfinance for the remaining. The requirement for both policy loan and microfinance is an application form and agreement form. The effect on the policy loan is that it will reduce the amount of Bien's life insurance with the principal and interest. On the other hand, the microfinance has 3.5% interest rate per month payable for 5 years.

Bryan has a 5-year real estate property costing Php 350,000.00 at par. He plans to take a loan of Php 500,000.00 from a bank, giving the title of his land as collateral. The bank has an interest rate of 9% per annum, payable for 10 years.

Required -

1. Is Bien's loan application a wise decision? Why or why not?

2. Is Bryan's loan application a wise decision? Why or why not?

3. What can you suggest or advice the brothers about their loan plans? Explain your answer.