Mortgage Dictionary -> Lender
Even if you are frugal with your money and save as much of it as possible, you probably won't be able to buy a car when you want it simply with the cash you have in your savings account. Nor will you probably be able to afford a $200,000 house when you really want to buy it. It's pretty much certain that you'll require the use of a lender at some point in your life, and it's best to be educated about lenders.
What is a Lender?
A lender is a financial institution, can be a bank, credit union or other institution, that loans out money to borrowers. This money must then be repaid to the lender according to the rules outlined in the loan, as well as any interest the loan accumulates. Lenders make their money off of interest rates and other finance charges on the loan; they do not make their money from simply loaning out the money.
What Types of Lenders are There?
Educational Lenders. These are lenders whom only give loans for the purpose of paying for an education. The U.S. Government is one such lender, as well as other lenders like Sallie Mae and even CHASE bank. Most educational lenders do not expect repayment of the loans until the borrower is finished with school.
Hard Money Lender. This is a lender who specializes in short-term loans. While this lender approves borrowers much easier, the lender also charges a very high interest rate and expects repayment of the loan rather quickly or else they will take whatever collateral has been placed on the loan.
Commercial Lenders. This is usually a financial institution, such as a credit union and bank. Commercial lenders are thought of as being the best type of lenders around, as the repayment terms tend to be both flexible and affordable, with a low APR in most cases.
Some Tips for Borrowers Considering Lenders
Do Your Research. It's unwise to choose a lender without first reading up about them. This makes sure you don't get saddled with a lender that expects too much of you.
Negotiate. If you have several offers on the table, you should use it to your advantage to get a lower interest rate.
Shop Around. Not all lenders offer the same interest rate or loan terms, so it's important to look around and find the lender that offers the best deal for you. There are many web sites that allow you to compare lenders, and it's advisable to use these.