Lender

Definition

A lender is an individual, institution, or entity that provides funds to a borrower with the expectation that the funds will be repaid with interest. Lenders play a crucial role in financial markets by facilitating access to capital for businesses and individuals.

5 Must Know Facts For Your Next Test

1. Lenders assess the creditworthiness of borrowers before issuing loans.
2. Interest rates set by lenders are influenced by factors such as risk, inflation, and market conditions.
3. Common types of lenders include banks, credit unions, and private investors.
4. Lenders have legal rights to recover funds if borrowers default on loans.
5. The relationship between lenders and borrowers is governed by loan agreements specifying terms and conditions.

Review Questions

• What factors do lenders consider when assessing a borrower's creditworthiness?
• How do interest rates set by lenders impact borrowers?
• What legal rights do lenders have if a borrower defaults on a loan?

Related terms

Borrower: An individual or entity that receives funds from a lender with the obligation to repay them under agreed terms.

Interest Rate: The percentage charged on borrowed funds, reflecting the cost of borrowing.

Creditworthiness: A measure of a borrower's ability to repay a loan based on their financial history and current situation.