How do money lenders work ?

The nitty-gritty of borrowing (and lending) may vary depending on the type of loan you’re seeking (student loan, car loan, mortgage, etc.), the general principles can be applied across the board.

In the most basic sense, lending is the act of giving money to someone now with the expectation they will pay you back in the future. Usually, lenders are reimbursed by ongoing, monthly payments made by the borrower until the total amount owed is received. In return for lending the money, the lender charges the borrower a percentage of the amount borrowed, which is known as an interest rate.

In general, the lender determines the interest rate, and it reflects the likelihood that the borrower will repay the amount owed on time. Lenders use different ways to calculate interest rates, but typically an individual’s credit score has a lot to do with it since that’s how the lender predicts an individual’s ability and likelihood to pay (higher credit score = lower interest rate).

It’s important to know how loans work before you borrow money. With a better understanding of them, you can save money and make better decisions about debt—including when to avoid acquiring more or how to use it to your advantage. Your loan agreement will have information about how to repay your loan, and the exact setup depends on what type of loan and terms you have. Generally, you’ll make a payment by a scheduled due date every month. You can typically set it up as an automatic draft or mail a check to your lender each month. If your loan allows it, you can also make extra payments toward the principal to pay it off sooner.  There is good at money lending in ChinaTown , for money lending related queries, you can visit them.

  • Despite the strides made by the banking and the formal financial sector, India continues to be a credit-starved country. There are many reasons behind this, which I will not touch on in this article, but it has meant the money lenders that operate outside the formal structure continue to flourish. When money is in short supply, borrowers are often victims, and more often than not such borrowers are from the weaker sections of the society.
  • Money lending is one of the oldest professions in the world and it has stood the test of time. Times have changed, borders have been redrawn, the financial structure of the world has been revamped, but money lending as a profession has continued to thrive. This is primarily because of the nature of profits one can earn by lending money.