who is a lender

Who is a Lender?

Learn about Lenders with Parineeta
Who is a Lender?
Parineeta 2005

The scene shows Navinchandra Rao telling his wife that he had lent some money to Gurcharan (his neighbor). When Gurcharan couldn’t repay the money, he took Gurcharan’s mansion. Navinchandra claims this to be a business while his wife blames him for the discord between families.

In this blog, Learning Perspectives will explore the meaning of a lender.

Who is a Lender?

Borrowers generally ask for loans from banks, individuals, groups, or financial institutions. Different types of loans can be personal loans, home loans, student loans, vehicle loans, or any other loan. These loans are given with the expectation to receive either the amount in lumpsum or in installments along with interest. These banks, individuals, or financial institutions are lenders. Lenders grant these loans to borrowers.

Lenders also give loans to start-ups or small businesses. Before granting the loan to the borrower, a lender checks the credit history of the borrower. This means making sure that the borrower would be able to repay the loan back. This would include checking the income and liabilities too.

If these checks are missed by the lender, the lender might set themselves up for failure. If there are some non-repayment issues then collection agencies are recruited for the loan recovery.

Type of Lenders:

Traditional Lenders

As the name suggests these are the lenders that are mainly registered financial institutions and banks. These institutes have uncompromising borrowing requirements. if they are not fulfilled then the borrower may fail to get a loan. Individuals and corporate houses who are seeking loans need to fulfill these criteria before they are granted a loan.

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Who is a Lender

Alternate Lenders

These lenders can be classified as online or P2P (peer-to-peer) lenders. In this case, the terms of the loan are quite relaxed. Crowdfunding and short-term credits have become quite common today. Whenever an individual or a business opts for a secured loan, they have to provide collateral too. A collateral is a security that is deposited with the lender. In case of default, these lenders can sell the collateral to recover their dues. This is similar to the scene above. When Gurcharan das wasn’t able to repay the loan, Navinchandra (lender) sold his property to recover his dues.

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