We can’t deny the fact that at the time of financial crisis all of us require somebody to lend us money. To tackle this situation there are money lenders who make borrowing easier. The formal process of money lending is normally restricted by different rules and regulations that’s why people often switch to money lenders. This form of money lending holds a huge market space in countries like India due to its vast economy. Click here to become good at money lending in Chinatown. Important factors to think about before borrowing from a moneylender:
- Alternative Borrowing Possibilities
Make certain that you have exhausted all formal credit-obtaining options. Some of these channels do not necessitate much documentation and are completely painless. After you’ve exhausted all other options, conduct thorough research and choose a private money lender.
- Licensed Moneylenders
Every state in India has a Money Lender’s Act that requires money lenders to be licensed in an attempt to regulate them. Unfortunately, the majority of them do not register and may engage in unethical practices.
- EffectiveInterest Rate
Before signing any agreement, make it clear what the effective interest rate will be. The effective cost for the same interest and loan amount will vary depending on the repayment schedule. Remember that if your installments are smaller, your effective cost will be lower than if you repay smaller amounts more frequently.
- Additional Fees
Check to see what other fees the moneylender may levy on you. They have been known to charge a late fee, a pre-closure fee, and a penalty for a dishonored repayment cheque. It is a good idea to have all of this written down in your agreement, as well as to state that there will be no additional charges other than those stated in the agreement.
- Loan Repayment Procedure
This is the most important thing you should know before borrowing money. Loan sharks or loan recovery agents are used by some money lenders. In the event of late payments, these may resort to physical harm. This can result in significant resentment as well as a threat to you and your family.
However, there may be times when your credit history is not favorable or you do not have a consistent source of income, both of which can make it difficult to obtain an unsecured loan from a bank. Whatever your reason for borrowing from a moneylender, keep the points discussed in this article in mind before making a final decision.