An economy functions on the good economic structure and free financial flow. Banks are the most important institutions that help in the financial flow. They are called as traditional institutions. Their main function is to provide loans to people in need of money, for personal needs and for business purposes. They require good collateral for providing this loan. However, not everyone is able to provide the proper collateral for acquiring loans. In such situations, the money lender comes to the rescue of people and provides loan facilities.
The Role of Money Lenders
A Money Lender provides financial assistance for all those in the financial crisis. They may function as a group or as an individual and offer loans at a higher interest than banks. As they provided loans even without a security, the risk involved is much higher. Charging a higher interest helps money lenders overcome the risks involved through their loans. Money lenders provide loans in many ways. They provide mortgage loans, personal loans, business loans and other commercial loans. Getting loans through money lenders are generally preferred because you can get quick loans that get processed immediately. The credit score of an individual is one of the most important criteria that money lenders seek, to provide loans. The credit score of a person helps them to decide if a person will be able to repay the loan responsibly. The ability to repay the loan is measured by the ratio of the debt to his income. Money lenders are also willing to provide loans to those who are not able to have a good credit score but have a good income. The money lender lends his money based on the value of the collateral provided as security and the loan amount is also determined by the security provided by borrowers to the lenders.