What is a Lender ?

A lender is any institution or individual who loans a borrower money. There are a number of types of lending organizations, including educational lenders, commercial lenders, hard money lenders, lenders of last resort, and mutual organizations. The most traditional type of lender is a commercial lender. Often a commercial lender is a banking institution, though it may also be a private financial group. This type of lender makes an offer to the borrower of certain terms, including interest rate and length of loan, with the goal of maximizing their profit in relation to the borrower's risk of defaulting on the loan.
Often a loan is brokered, meaning that the borrower is evaluated by a third-party who then proposes the loan request to a number of different lenders. These lenders are chosen based on their likelihood of accepting the particular borrower, and may negotiate small changes in the terms to attract the borrower if they find her desirable.
A hard money lender specializes in short-term loans which are backed primarily with real estate as collateral. A hard money lender in general offers worse rates than a traditional banking organization, in exchange for more flexible terms and a broader range of deals they are willing to back. In some states within the US, hard money lenders are forced to operate differently than they do in the country as a whole, because of conflicts between their standard practices and those states' usury laws.

A mutual organization is a financial cooperative operating to lend money to its members. The constituents of a mutual organization put money into a collective, where it may then be disbursed to members in need of loans, at amiable rates and with good terms. By eliminating the need to turn a profit, mutual organizations are able to give higher interest rates on deposits and lower rates on loans than traditional banking organizations. Types of mutual organizations include community credit unions and friendly societies.
A lender of last resort is a special type of lender which focuses on protecting a country's national economy from collapse. A lender of last resort will lend to banking institutions on the edge of collapse, in order to protect their depositors and to stop total panic from pushing the economy quickly downhill.
The term lender of last resort has also come to refer to private institutions which give loans to people with a very low credit score or an otherwise extremely high risk of default. This type of lender offers loans at exorbitant interest rates as a way of covering losses from the high default rate they experience with their borrowers. A lender of last resort may also refer clients to a loan shark, offering loans at even higher interest rates for virtually any purpose.


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