Types of Lenders
Are you looking for someone to lend you money? If this is the first time you are going to apply for a loan, you probably have many doubts, including “what types of lenders are there” and “who should I go to?
In this article we will talk about types of lenders, the advantages and disadvantages of each one, so that you can make a good decision and avoid surprises.
Let’s start by defining what a lender is.
A lender is the person or entity that, in a loan contract, delivers a certain amount of money to another person called borrower. The borrower agrees to repay the money to the lender on the agreed date.
In return, the lender charges interest to compensate for the risk. The percentage of interest charged by the lender depends on the level of risk, so rates may vary.
Types of lenders
There are several types of lenders, below we will talk about each of them:
These are natural persons who make loans with their own resources. For this reason, the interest they charge is usually quite high and their processes are informal.
One of the biggest advantages that people find in this type of lenders is that they do not ask for requirements, however, as they are natural persons, they are not governed by regulations, which represents a great risk for the person requesting the loan.
You should be very careful with this type of lenders, since in some cases they may be scammers. In addition, repayment terms are often inflexible and collection methods are informal.
These are banking entities that offer money loans to both individuals and businesses among their financial products.
These types of entities are registered and regulated by the SBS, so they are usually very safe alternatives.
The main disadvantage of this modality is that they are quite rigorous with the requirements they ask for and the evaluation process is usually a bit slow. On the other hand, in most cases it is necessary to have a credit history to access a loan with this type of lender, which is a problem if it is your first loan.
Private Equity Lenders or Non-Bank Lenders
In this category are all financial entities that are not banks, but offer money lending services. An example is QVCredit Singapore.
Online lending companies fall into this group. One of the main advantages of this type of lenders is that the requirements requested are minimal. In addition, the application process is very simple and fast, you could receive your loan the same day!
This is an excellent alternative if you need a quick loan, however make sure that it is a formally constituted company and that it is registered with the SBS to avoid falling into the hands of scammers.
What type of lender is best for me?
Knowing which type of lender is best for you will depend on your needs and situation (how much you need, how urgently, if you have a credit history, etc.). Carefully analyze the options you have and if you meet the requirements, but above all, make sure it is a safe option. You can guide yourself by asking these questions:
- How much can I borrow?
- Do I qualify for a loan with a bank?
- What are the requirements for a non-bank loan?
- Will I need a guarantor or collateral?
- How urgently do I need the loan?
- How long will it take to get the loan?
- What repayment terms will I be offered?
- Is it a safe option?
- Is it registered with the SBS?
Answering the above questions will guide you as to whether the options you are evaluating fit your needs.
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