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What Is a Money Lender?

A lender is an entity - individual or group - that loans another party money in exchange for a fee. The party that received the money from the lender is called the borrower. There is a plethora of lenders today, ranging from individual lenders to commercial lenders, the latter being the more common.

Informally, anyone can be considered a lender if he or she offers money to someone in need and asks for a fee in return. Commercial lenders, on the other hand, are usually banks and similar institutions. In order for them to give the money to a borrower, the borrower must apply for a loan and the application has to be approved. This is a formal process which involves a credit check, among other things. A loan from a commercial lender also involves a structured repayment plan. Interest rates, as well as the period of repayment, are determined by the lender. Quite obviously, lenders offer their services to make a profit in the process.

There is such a thing as a loan broker, who acts as a go between. A loan broker evaluates the financial situation of the borrower and then chooses potential lenders based on the “qualifications” of the borrower. The loan broker also has a limited power of negotiation in order to sweeten the deal for the borrower.

An interesting type of lender is called “lender of last resort”. As the name implies, this kind of lender comes into the picture in times of dire need. For example, if a bank is on the verge of going bankrupt, a lender of last resort may offer their services in order to avoid a major economic problem.

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