Money Lenders

Money lenders is a term that may refer to any persons or organisations that loan money to other persons or organisations; however it can be used more specifically to refer to traditional lenders that offer loans to people that might have trouble getting money elsewhere, often at high rates of interest.

What are Money Lenders?

Money lenders have a long tradition of operating in certain parts of the community, with money lenders targeting those on low incomes that may not have had bank accounts, or due to low income may have found it difficult to borrow money. The type of money lenders that worked in these communities were generally doorstep lenders: they visited debtors’ homes each week to take payments and offer more credit if necessary, and often visited the same homes for so long that they became familiar to the borrowers. Details of the unsecured loans given out in this way were generally not passed to anyone other than the lender, so they had little effect on the borrower’s ability to borrow elsewhere – their credit rating – for good or ill. The only other lenders who their borrowing record might have influenced were other money lenders in the local community, who would have an idea of the reputation of the borrower for paying loans back on time.

Despite the personal service they offered to hard to reach parts of the community, the main problem with these loan companies operating as money lenders was their high interest rates and steep loan charges, which they were safe to offer as their clients had few other options. As a result, clients could get into trouble by going to these money lenders for bad credit, taking on debt they could not afford to repay.

Nowadays, however, this role has been mostly taken over by online lenders and pawnbrokers, though some more traditional money lenders still exist. The worst of these local money lenders, often unlicensed, are known as loan sharks; these lenders charge punitive interest rates, often employ very unsavoury means to ensure debts to them are repaid, and should be avoided completely.

Online money lenders offer a similar service to traditional money lenders, but instead of the lender physically visiting the home of potential borrowers the borrowers get information and apply for loans over the World Wide Web.

Short Term Money Lenders

Many modern money lenders’ primary task is to act as short term money lenders. This means that rather than offering large amounts to be borrowed over an extended period, small amounts are borrowed over a short period. Any borrower wishing to borrow larger amounts for purposes such as home renovation, debt consolidation, cars, holidays or the like should go to standard high street lenders such as building societies and banks.

Avoiding Money Lenders

Those who may have difficulty in obtaining credit should try to avoid short term money lenders due to the high interest rates they charge; instead they should try to obtain credit from one of the credit unions that exist in their locality, or perhaps assess the services offered by peer to peer lenders. The former, at least, exist to provide an affordable alternative for credit for those that have been marginalised by the consumer credit market.

In addition, anyone facing unmanageable debt should seek advice on debt management before turning to money lenders. There are a number of sources for this, many of which offer free debt advice.