Financial institutions and loan sharks lend people and businesses money only when they are certain they would get their money back. Loan seekers are required to pay interest together with the loan, the interest that these loan seekers pay can be either fixed or subject to change. Financial institutions first look at a person’s credit history and monthly income before they lend them money, people that have bad or poor credit history have difficulty borrowing money because money lenders consider them to be high risk.
Loan sharks that lend out money make profits from the high interest rates that they charge for their loans. Lending people money is a very risky business because a person cannot be certain that they will get their money back therefore many money lenders have come up with different systems that help them differentiate loan seekers that pose as risks from good clients. Companies that lend out money have to be registered for them to be considered legal entities.
Loan seekers apply for loans so that they can pay for different things, these loans seekers are advised to first to assess the financial status before applying for a loan. When a person lends another person money he or she expects the money within a certain period therefore it is the duty of the borrower make sure that they meet their part of the agreement by returning the money to the lender on time.