How to Distinguish Unlicensed and Licensed Money Lender

Money borrowing is a wondrous thing until one thing goes wrong. Then, you won’t really like it. Well, one of the things to look out for before borrowing is the credibility of a lender. Before borrowing, you must ensure you have details of your potential borrower. That way, you will almost certainly know what awaits you when it’s time to repay the loan.

Licensing is an essential factor in the credit world. Lenders that behave are more likely to have been licensed. Licensing proves the worthiness of a lender. Those that are not regulated will give you problems you’ve never seen before.

Here are ways to distinguish licensed from unlicensed money lenders.

  1. Proof of licensing

Any organization subscribing to specific standards will always get a license. You should see the physical license or documentation standing in for the permit. The permit should show the issuer is and must be legitimate.

Proper licensees should be verifiable and worthy. Unfortunately, not every issuer is qualified to issue licenses. Besides, not all charges are valid and guarantee quality lenders.

  1. Licensed by regulatory bodies

You will find many licenses out there. Lenders know a permit is one of the things borrowers look out for. That is why they work hard to get permission to use it as bait.

Mind you, the proper regulatory bodies will not issue a certificate to every applicant. That is why you must research which regulatory bodies are up to standard.

In most cases, the government founded and ran regulatory bodies to set the standards. There may be more international ones you would want to learn about. Just ensure they’re credible and trustworthy.

  1. Banks vs. Unbanked

Banking is a heavily monitored finance sector. Governments and other stakeholders work around the clock to ensure these lenders are well guided. This is to shield borrowers from punitive rates.

A facility referred to as a bank has the highest chances of being regulated. On the other hand, an unbanked facility or one that operates under a name that’s not a bank has higher chances of being unlicensed.

That is not to rule out all non-banks as unlicensed facilities. For example, some institutions that lend money may not be banks but licensed.

  1. Private vs. Public lending

Most public lenders are licensed compared to a smaller number of licensed private lenders. As a result, some private lenders may not cope with regulatory policies, especially interest rates.

That’s why they’ll rarely get licensed. But, on the other hand, the lenders may be justified to have higher lending rates.

For instance, if you refuse with government money, they will blocklist you. As a result, you may never have access to significant credit facilities. That is enough to compel you to pay back.

Knowing this, these regulated lenders face lower risks and, therefore, can offer credit on lower return rates. As a result, compliance becomes easier for them.

On the other hand, private lenders have to put higher return rates to mitigate risks. That way, the business stands a chance to grow.

  1. Debt recovery techniques

Try to find out how your potential lender collects their debts. Unlicensed lenders will issue threats even upfront. Or you will get threatened even for delaying for a few days.

Whenever such a thing comes so early, you have to be very keen. These unlicensed lenders love to use these embarrassing methods to force you to repay their loans.

At this point, the vulnerable get hit so hard. Licensed organizations act professionally. They will try to recover their money professionally. These are some of the things that regulatory bodies look out for.

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