Lender definition
/What is a Lender?
A lender is an entity that makes cash loans to other entities or individuals in exchange for either a fixed or variable interest rate and a promise of repayment. There are several options for the repayment of these loans, such as in accordance with a fixed monthly schedule or a lump sum payment that is due on the maturity date of the loan.
Lenders are needed for several reasons, including the following:
To provide funding for major purchases
To increase the amount of working capital funding
To provide a backup line of credit to support irregular cash flows
Lenders may choose to offer only certain types of loans, or to restrict their lending activities to certain types of entities. For example, a lender may specialize in mortgages to individuals, or lines of credit to businesses.
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Types of Lenders
There are many types of lenders, including the following:
Traditional lenders. Includes banks, credit unions, and savings and loan associations.
On-line lenders. Entities that issue loans via online platforms.
Peer-to-peer lenders. Online marketplaces that connect individual borrowers with private investors.
Private lenders. Includes wealthy individuals or organizations offering loans outside traditional channels.
Hard money lenders. Provide short-term loans secured by real estate.
Microfinance lenders. Offer small loans to individuals or businesses in developing areas.
These types of lenders serve different borrower needs, ranging from personal to business financing and short-term to long-term credit requirements.