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CandleFocus Glossary Editor
Lending is an integral part of the modern financial system, allowing people and businesses to purchase goods and services even if they don't have the funds available to pay for them in full at the time of purchase. While lenders and borrowers can be individuals, the most common type of lending occurs between lenders and businesses, such as banks and other financial institutions.
A lender provides funds to a borrower with the expectation that the loan will be repaid, with or without interest. Lenders make money by charging interest, or a fee for borrowing funds. When an individual or business takes out a loan from a lender, they agree to pay a certain amount of money back with interest at regular intervals over a pre-determined period of time. The purpose of this system is to protect the lender's interest while giving borrowers access to the funds they need through institutions like banks, credit unions, and online lenders.
Lenders use a variety of criteria when deciding whether or not to approve a loan. Generally, lenders look at an individual or business's credit history and credit score, income and assets, employment history and job stability, and other factors. The amount of interest charged depends largely on the creditworthiness of the borrower and the size and duration of the loan. When a loan is repaid (in full or in increments) the loan is considered to be closed and the borrower's credit report is updated to reflect the activity.
In short, a lender is an individual, business, or financial institution that provides funds with the expectation that they will be repaid. Lenders make money by charging interest, and lean on criteria like credit history, income, assets, and more in order to evaluate a borrower’s ability to repay the loan. Many times, the only way individuals and businesses can gain access to the funds they need to make large purchases or investments is through a lender. In turn, lenders are indispensable to the modern financial system, helping provide a foundation upon which long-term growth can be built.
A lender provides funds to a borrower with the expectation that the loan will be repaid, with or without interest. Lenders make money by charging interest, or a fee for borrowing funds. When an individual or business takes out a loan from a lender, they agree to pay a certain amount of money back with interest at regular intervals over a pre-determined period of time. The purpose of this system is to protect the lender's interest while giving borrowers access to the funds they need through institutions like banks, credit unions, and online lenders.
Lenders use a variety of criteria when deciding whether or not to approve a loan. Generally, lenders look at an individual or business's credit history and credit score, income and assets, employment history and job stability, and other factors. The amount of interest charged depends largely on the creditworthiness of the borrower and the size and duration of the loan. When a loan is repaid (in full or in increments) the loan is considered to be closed and the borrower's credit report is updated to reflect the activity.
In short, a lender is an individual, business, or financial institution that provides funds with the expectation that they will be repaid. Lenders make money by charging interest, and lean on criteria like credit history, income, assets, and more in order to evaluate a borrower’s ability to repay the loan. Many times, the only way individuals and businesses can gain access to the funds they need to make large purchases or investments is through a lender. In turn, lenders are indispensable to the modern financial system, helping provide a foundation upon which long-term growth can be built.