Moneylenders do not function like credit union per se. They are individuals or companies from a list of licensed moneylenders whose main business function is to lend money. But like other business entities, they are required as well to hold a license to trade in money lending to protect customers welfare a well.
So what makes money lending practicable or even better than any credit institution?
Money lending does not only lend immediate cash but supplies goods or services too which will be repaid at a high level of interest over a short period of time. This is the reason why we are not associating the money lending business with banks, building societies, insurance companies and credit unions.
There are several ways on how repayment is made in money lending. Unlink other types of loan in which monthly or bi-monthly payments are done by borrowers, money lenders collect loan payments in cash each week and includes collection charge for this service. Because of this, most borrowers opt to go to lender’s premises and make payment to avoid the collection charge. Direct debit can also be a method used for repayment purposes.
Like any other term agreements, collection charges should already be outlined in the document that is why it is very important for the borrower to read the content of it before signing. An agent might be sent as well by the money lender to collect repayments from customers, in which a written authorization letter from the latter should be presented. Moreover, the agent is only tasked to collect repayments and cannot initiate new loans as this needs a new or revised term agreement drafted by the money lender.
As for the customer’s protection as well, the amount they need to pay back on their existing loan stays the same no matter how long this might take to get fully-paid. Laws stipulate that money lenders are not allowed to charge any extra interest or charges over and above what they are licensed to charge and what they have agreed with the borrower as well to charge at the start of the loan.
If you are experiencing difficulty in paying off a loan, you should contact your money lender as soon as you can and be sure to always read and review all terms of agreements first before placing your signature on that dotted line.