When you encounter an unexpected financial difficulty, you might consider borrowing from a moneylender. However, it’s important to understand that borrowing from a licensed moneylender is generally more advantageous.
Mainly, not all lenders are the same. As you search for the right moneylender, you’ll likely come across both licensed and unlicensed lenders.
Benefits of Borrowing from a Licensed Moneylender
While licensed moneylenders operate under strict regulations, unlicensed ones run shady operations that promise quick cash with no paperwork.
However, while getting help from licensed money lenders is a more brilliant, safer, and, after all, much better option, it’s tempting to borrow from illegal lenders.
Below are key reasons you should take your time to research and ensure you are dealing with a licensed money lender.
1. You are Protected Under the Law
Licensed moneylenders operate strictly under the stipulated regulations laid out by the government. This means they follow rules regarding interest rates, payback terms, and how you should be treated.
With a licensed moneylender, you can rest easy, knowing your rights are protected, and you will not be harmed.
On the other hand, unlicensed money lenders operate outside of the law where they care less; they charge you atrociously high interest rates and threaten you when you can’t pay up.
2. Fair Interest Rates And Transparency Of Terms
This is one of the most valid reasons to borrow from and deal with a licensed moneylender. They are transparent about their interests and operate in black and white.
On the other hand, illegal money lenders charge high interest rates that sometimes get out of control due to hidden charges. Since you would not want to be stuck paying ten times what you borrowed because of a small clause you never knew existed, only borrow from licensed money lenders.
3. A Licensed Moneylender Will Not Use Intimidation Tactics
Licensed money lenders work within the dictate of the law and would never threaten intimidation to collect their money. Instead, they would try to work with you when there is a problem and find a solution. That is professionalism, deserving of absolutely nothing but the best.
You may have heard horror stories about illegal lenders threatening borrowing through phone calls and generally harassing them. All those are not just stressful to the borrowers but terrifying, and you should avoid them.
4. Access to Legal Recourse
Suppose you have a problem with a licensed money lender, such as a misunderstanding during the borrowing or repayment period. In that case, you can take the matter to the relevant authorities, and they will intervene.
In the case of illegal lenders, you are entirely on your own in case of any issue during your loan borrowing and repayment tenure. Unlicensed money lenders operate outside the law, so borrowers have no legal recourse.
5. It’s Better for Your Credit and Future
Accredited money lenders report to the credit agencies, meaning you will also get an improved credit score once you repay the loan. Notably, the enhanced credit score opens avenues for better future financial opportunities.
Illegal lenders don’t care about your credit score. They just give you loans and unscrupulously get back your hard-earned cash through high interest rates and hidden fees. Mainly, even if you repay the loan within the agreed time frame, there are no added advantages except being enticed to borrow more.
Conclusion
Although illegal lenders might be quicker, the risks outweigh the returns. You are likely to pay exorbitant fees and face harassment occasionally during the loan repayment period.
On the other hand, borrowing from a licensed money lender puts you on track with a journey to financial stability, not into some vicious circle. Therefore, only borrow from licensed money lenders to avoid headaches.