Banking is a very old and a traditional business in which they lend money and also store people’s money safely into their account.
The moneylender also existed for many years, but they only deal in putting forward their own money to the people who come to them because they want money.
Banks nowadays have gone digital also and are very advanced; they accept deposit from customer and also withdrawals made by them in their daily life.
Those people who trust in the bank and create their bank account and safeguard their money in it are given interest whenever the person wants to take out money from the account. This is a sign of appreciation that the bank gives to those people who trust them and invest in it.
Moneylenders do not accept deposit from their customer; they only lend their money to them for some time, and then the person has to give them the amount back in the specified time period.
Here are the common point of difference between a bank and a moneylender:-
- Acceptance of deposit:- Banks are those institutions which can accept deposit from their customers as well as from other people like investors who are used to investing in big companies etc.
While moneylender cannot accept deposits from their customer or investors as they don’t have a business and they can only take deposits from their relatives and friends.
- The lending of money:- Banks are that institution that lends money to the borrower from the deposit which has come in from their other customer and also investors.
While moneylender can give loan only from the amount of money they have stored and also from the money taken by their relatives or friends.
- Monetary help:- Banks can take money from the Central bank of their country if they are having some trouble with lending people money or they don’t have enough deposits to give loan to someone,
The moneylender cannot take money from the Central bank of a particular country as they are not registered as a financial institution.
- Chequable deposits:- Banks have the facility where they can give the money back to the customers if they want to as they have deposited their money into the bank.
Whereas moneylenders don’t have this option as they take only deposit from their relatives and friends and they can pay it back whenever they want.
Seven difference of taking a loan from bank and money lender
Banking is a traditional business and mostly deals with money lending. Moneylenders give their own money as a loan to the borrower and bank gives the money from the deposit made by other customers in it.
Moneylenders do not receive any deposit from their customers, and even if they receive, they don’t have to pay any interest to the depositor as banks do.
These are the difference in taking a loan from bank and moneylender:-
- Impact of technology:-
Technology plays an important role in every sector of business available in the market. The lending of money in Singapore is dominated by the bank and has made it almost impossible for moneylenders to give out a loan.
So this has forced the people to go to moneylenders to take the loan and pay whatever the interest rate is asked by the moneylender.
- Loans from both:-
While taking m loan from a moneylender, they can provide you with only small amount of loan which may not be sufficient for you to buy yourself a house and also pay its registration fees and other fees.
The money stored in a bank is kept safe and is given to almost every person that arrives at the bank and follows all the rules and regulation for taking a loan and bank can provide you with a loan with a huge amount.
- Evaluating credit:-
Moneylenders do not pay that much attention to their customer’s credit score as they only give out loan for a small amount only but charge a high rate of interest in case anyone fails to repay the loan.
Many banks reject the application of loan from their customer as they don’t have a good credit score which is not according to their guidelines and also their rules.
The interest rate charged by money lenders are way higher than that of the bank as the bank has trust on the person taking the loan and if they are unable to pay the money back, they are given some extra time and then they will be sued.
While the money lenders charge high-interest rate as they don’t even have any means to sue a customer.
- Loan amount:-
Moneylenders offer a small number of loans as they put their money forward to the borrower while the bank uses the money made from deposits made by the customers almost daily.
Banks give more money as they have any money stored in the bank then money lenders.
- Access to information:-
Moneylenders don’t have access to your personal information but only your credit score while the bank has your personal info as well as your financial statement.
- Loan process:-
You will usually get the loan faster from a moneylender than a bank as the bank will have the process to send documentation for verification here and there while in case of money lender they are the owner of the money and can decide the amount they want to give and does not require much paperwork.
I hope this article has given you the answers you seek.