Lender

A lender is an individual or organization that provides funds to another party with the expectation of repayment, usually with interest. Lenders assume credit risk and may impose terms that specify the loan amount, interest rate, repayment schedule, and any collateral or guarantees. Common forms of lending include cash loans, lines of credit, mortgages, and vehicle loans.

Various types of lenders include banks and credit unions (deposit-taking institutions with regulatory oversight), online lenders (non-traditional platforms using digital underwriting), microfinance institutions (serving small borrowers in developing economies), government lending programs (subsidized or insured loans), and private lenders (family, friends, or private finance). Distinctions include secured vs unsecured and traditional vs alternative underwriting.

How lending works: A borrower applies, and the lender evaluates creditworthiness through credit history, income, debts, and collateral; underwriting determines risk and terms. If approved, a contract specifies the principal, interest rate, fees, and repayment schedule. Loans may be secured by collateral (mortgage, auto loan) or unsecured (personal loan).

Regulation and risk: Lenders operate under licensing and consumer protection regimes that require disclosures, fair lending practices, and anti-money laundering controls in many jurisdictions. Credit risk management includes monitoring, provisioning for expected losses, and compliance. Market developments, including fintech and online lending, have expanded access but raised concerns about predatory lending in some contexts.