Understand Major Consumer Lenders

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Everybody knows that banks are a major consumer lender, they represent over 70% of all consumer loans in the market. In fact, besides banks there are many other financial institutions that offer consumer loans in the market. Some of them offer cheaper interest rate to attract customers. It is your responsibility to find out so you can pay very little interest and save some money. In this article, we will discuss some major consumer lenders.

1. Banks
Banks borrow from depositors to lend to those who need money. They charge sufficient interest on the money they lend to pay interest to their depositors, normally with the spread (spread is the cost of operation and profit for bank shareholders) of 2-4% depending on the credit history and risk of the lenders.

2. Trust
a) Trust companies provide financial and trustee services to consumers and corporations such as consumer loans, mortgages, acts as trustee for corporation or private companies, or handling pension funds.
b) In exchange for their services, trust companies charge an annual fee, usually 1% of total asset or fixed amount.
c) It also provides service for individuals, such as handling both living trusts (established during a person's life) and testamentary trusts (created by a will, on a person's death).

3. Small loan companies
Small loan companies make small loans to consumers. The service charges and interest rate are usually higher than at banks or trust companies because most of the customers are higher risk borrowers, higher cost of processing small loans, and these companies must borrow from other sources.

4. Insurance companies
Insurance companies can also issue loans made against life insurance policies that have cash values. Normally, it takes at least 2-5 years for cash-surrender values to build up enough to make the policyholder eligible for a loan. Some insurance companies give policy owners the right to borrow up 90% to 100% of the cash value as indicated in the insurance policy. Remember there is no time limit for repaying the loan and interest due will automatically be added to the loan.

5. Credit unions
Credit unions originally created to offer services to low-income families whose only alternative was a loan shark by pooling the funds of members, money could be lent at reasonable rates to other members who needed to borrow. Some credit unions have become very large and compete efficiently with banks and trust companies in interest rates and services offered.

You may also find some consumer loan brokers or agency acting on behalf of major banks, trust companies or private lenders for a service fee.


I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:

http://lifeanddisabitityinsuranceunderwriter.blogspot.com/
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Posted by Kyle J. Norton at 3:51 PM