How does microlending work

how does microlending work

How long does bad credit history last?

Full Answer

Microlending is often facilitated by community lending sites, where users can sign up, read loan requests, and choose borrowers to fund. Many prospective borrowers are from third-world countries and are asking for small amounts to buy needed materials for a business. For example, the baker in a small village may request a few hundred dollars to buy an oven that will let him produce more bread. Repayment is usually on a weekly basis, and the interest charged can be steep. If a loan is paid off successfully, the borrower may request a new loan to further expand commercial operations. The risk on these sites is usually assumed by the lender, who may contribute small amounts to multiple loans in order to hedge against a potential default.

Related Questions

How does credit work?

Credit works via

a person borrowing money from a creditor and paying it back over time. Credit cards are the most common form of credit, and the borrower usually pays interest on the credit card balance. Credit bureaus track relevant information, such as owed balances, delinquent payments and timely payments.

How does bankruptcy work?

Bankruptcy is a legal process that enables an overly burdened debtor to obtain relief through a judicially supervised liquidation or reorganization of assets that is conducted for the benefit of the creditors. There are two main objectives of the United States bankruptcy laws. The first is to protect the rights of creditors so that lenders are not fearful of extending credit, and the second objective is to protect the rights of debtors so that they can have an opportunity to resume their lives or business affairs if they become overburdened.

How does foreclosure work?


Category: Payday loans

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