What are Moneylenders?

Article Details
  • Written By: Robin Raven
  • Edited By: C. Wilborn
  • Last Modified Date: 22 December 2018
  • Copyright Protected:
    Conjecture Corporation
  • Print this Article

Moneylenders are people or organizations that are in business to lend money in exchange for interest rates earned. Some moneylenders are international conglomerates. Other provide loans to just a few people in the community.

Traditional lenders, such as banks, offer personal loans to individuals over a determined period of time. The interest rates vary based upon the credit rating of the customer. The customer then begins repaying the loan in fairly low monthly increments. A customer who has achieved a high credit rating will likely receive the best interest rate the company offers. Banks offer incentives to these customers, and they are sometimes rewarded with such perks as a month without required payment.

A customer who has only fair credit will likely be unable to attain a loan without collateral. Collateral is what the consumer pledges to the bank for assurance that the loan will be repaid. If the loan then goes into default, the bank has permission to claim the collateral as its own. A customer with poor credit may not be able to obtain a loan from a traditional lender unless there are very unusual circumstances, such as an identity theft situation in which the individual's credit was tainted. Even if the customer with poor credit has a high amount of collateral, it may be the policy of many bank not to extend the loan.


The most well-known sort of lenders are those who loan people significant amounts of money for the purchase of a house. Some traditional lenders also offer mortgage loans. In a mortgage loan, the company conveys the deed of the property. If the mortgage loan goes into default, the mortgage lender can repossess the property. The consumers would then be displaced from their homes.

It is possible, in some circumstances, for people with little or no credit to get a loan from moneylenders. Many governments insure loans to students so that companies feel secure in offering loans to these potentially high risk clients. For instance, the United States helps students by providing the Free Application for Federal Student Aid (FAFSA), then coming up with financial aid solutions that include government-insured loans for students and/or their parents.

There are companies in business to provide loans to people with bad credit. A major market for this is the automobile industry. Car dealers often develop relationships with these loan firms, and the companies approve even those consumers who have past repossessions and bankruptcies. The catch is that the money is loaned at the highest legal rate possible for the country, and the consumer is often left with no car after having paid significant sums of money to the moneylender. The lender ends up with the car and the funds paid.

Another way that moneylenders may loan money to those with poor credit is to offer payday loans. With this sort of loan, a consumer often pays extremely high interest rates on money that is loaned for a very brief amount of time. Loan payments may be automatically be deducted from the borrower's paycheck if he does not repay the loan within a specified time period. Although it is considered predatory lending by some, it is legal in many countries.



Discuss this Article

Post your comments

Post Anonymously


forgot password?