Merits and Demerits of money lending

There are various reasons for which a person needs to raise funds but for them, you can not go to money lenders to ask for a loan. Though money lending is a beneficial option for everyone when there is a need for money. Trustworthy money lenders are the only option to seek money from. Money lending has several advantages and disadvantages which are further discussed ahead in the article. You should be aware of the merits and demerits to make a rational decision effectively and efficiently.

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Here are the Merits of money lending are:

Offers flexibility and versatility

Flexibility is a key feature of money lending especially in terms of choosing tenure of repayment and fixed monthly installments. Major financial institutions and banks understand the requirement of funds well and then allow the borrowers to get the loan to fulfill their needs as per their convenience. But only by agreeing on certain terms and conditions which are the base for safe business.

Interest rates are low and borrowing limits are higher

Money lending institutions and banks often offer loans at lower interest rates than the people who do this loan giving business and charging a higher interest rate from the general public. When you get higher borrowing limits from money lenders then you are capable to cover your maximum monetary needs.


When Loans are raised from banks and money lending institutions it becomes easier to manage them well than a loan from some unauthorized sources which are not even safe to rely on.

Here are the Demerits of money lending are:

High penalties and fees

It is known to everyone that money lending institutions charge a high amount in the form of fees and penalties that won’t allow building the trust of borrowers. As a result, they opt for unauthorized sources to borrow money to avoid high fees and penalties.

Expensive payment than credit cards

Repayment of the loan amount is still a big issue than repayment of Credit card bills. On missing any installment, your credit score and market reputation get affected. The amount of loan is itself higher than the amount you can get as a credit card bill.

Increases liability

Fund borrowed from money lending source is itself a debt to the borrowers like other debt. A certain amount of money has to be paid as a fixed monthly installment along with the interest that can not be avoided. This results in not trusting over such borrowing options that raise a permanent nature expense.