People lend each other money all the time, no matter to whom. You could be lending something simple like a dress to your sister or you can also lend a friend a specific amount of money. Lending, also known as financing, generally means allowing another person to borrow something. It can be money, property, or another asset given by the lender to the borrower, with the expectation that the borrower will either return the asset or repay the lender. The concept of lending is different to trading. Lending means letting someone borrow something from you but trading is willingly giving things or services and getting other things or services in return at the same time. A trade is where you exchange or swap items. Let’s take an example, borrowing some money is different from doing forex trading because forex trading is where you exchange currencies with another. In case you want to know more about forex trading, go to indonesia best forex brokers and you can ask for guidance from professional forex trading experts.
Now that you can differentiate them, let’s see the types of abuses you should know about so that you won’t end up as a victim or someone who unknowingly abuses others in lending.
This form of lending is where the lender forces the borrower into a difficult position that they can take advantage of. As the name suggests, the lender is the type to observe their prey and make a deal to lend them some money without a win-win situation. The borrowers that are desperate will take the offer and fall into the trap where they have to suffer from higher interest rates. An example is subprime mortgage-lending where the lenders are not authorized to let others borrow from them and payday-lending where the lenders are loan sharks. Avoid these lenders because they could use violence to threaten you or your family members if you fail to pay them back.
What does usury mean? It can be defined as the practice of making unethical or immoral monetary loans that unfairly enrich the lender. An interesting fact about this is that some religions prohibited the act of usury where you charge for interests on a loan as a sin. In Islam, it is called “riba'” and is totally prohibited as the money you received from that is considered dirty money. It is an immoral act that tramples on those who are in need of money and forces them to pay more than what the exact amount that they borrow. Usury also goes against the law as the act could be considered a crime and legal actions can be taken against you. For example, the United States implements the usury law where lenders are required to be licensed. In some states, the court will not allow the lender to sue the borrowers in order to recover the high interest when they charge above the lawful interest rate. Some states, meanwhile, apply all payments made on the debt to the principal balance.
In conclusion, be smart no matter what you are in: the lender or borrower. I hope this has been informative to you so that you will share this piece of knowledge to others in order for us not to be abusive in lending. It should not matter if it is between a married couple, family or banks. If you are a borrower, don’t borrow from a loan shark and make a safer choice by taking bank loans. If you are a lender, don’t charge excessive interest rates to your borrowers and make sure you are licensed to do that. Or else.