This article is focused on assured tips that will guide you on how to become a successful money lender. The experience associated with borrowing from banks and other institutions has creatively led to the birth of many others joining the business of money lending. In trying to scale the hurdles encountered by people in obtaining loans from banks, this led to the advent of money lenders who loan out money to people at high-interest rates since they often do not require collateral. Today, beyond fintech startups, individuals who are not CEOs of fintech companies are also money lenders.
Money Lenders have been in existence from time immemorial, and they have proven to improve commerce and trade. The growth of technology has also led to an increase in the number of money lenders today. Individuals who utilize private money lending find it easier to obtain funding quicker than if borrowed from a traditional banking institution.
In section 4 of the Money Lenders Law, it states that “a money lender is a person who lends money at interest or who lends a sum of money being repaid.” This means that any a person who lends money for interest consideration is presumed to be a money lender.
The business of money lending in Nigeria is extremely lucrative. Becoming a lender is essentially one of the smartest ways to promote wealth building. With the right knowledge, becoming a lender can be an extremely lucrative business for anyone. Unfortunately, lack of information hinder individuals to become money lenders. Notwithstanding, this article provides you adequate knowledge on how to become a successful moneylender in Nigeria.
These are the top five tips on how to become a money lender:
1. Identify your preferred lending focus:
Without money, the concept of money lending wouldn’t exist. To become a lender, you need to know your capacity in lending. Having a little extra money in the bank doesn’t mean you just jump at becoming a lender.
Despite the lots of benefits for money lenders, isn’t a path for everyone. You need to be equipped to manage risks and take advantage of opportunities. There’s a high risk but it establishes wealth.
Before you get into lending out money, you’ll want to look at several factors including how long you want the money to be tied up and how much you plan to make with it. This will help you narrow down lending choices. If you would need the money that you intend to lend before the borrower pays back, do not proceed with becoming a private lender.
Your preferred lending focus indicates your lending capacity. This will also help you figure out how much you can lend without negatively impacting on your household budget. Plan for a worst-case scenario just in case a loan doesn’t get repaid at a fixed time.
There’s the need to make realistic plans.
2. Join a peer to peer lending platform
Peer-to-peer lending (P2P lending) according to Wikipedia is “the practice of lending money to individuals or businesses through online services that match lenders with borrowers.” Peer-to-peer companies generally operate online and provide service more cheaply than traditional financial institutions.
Lenders can earn higher returns while borrowers can borrow money at lower interest rates even after the P2P lending company has taken a fee for providing the match-making platform and credit checking the borrower.
3. Explain processes.
Money lenders provide for individuals in need of financials. While they serve the same purpose as traditional lending institutions, there are several differences.
Being a lender enables you to create your own loan terms depending on the borrower’s goals and timeline. The interest rate can be set by lenders or fixed by the intermediary company. The lending intermediary companies generate revenue by collecting a one-time fee on funded loans from borrowers and by assessing a loan servicing fee to lenders.
As a lender, you can choose to dictate your processes in running a successful and sustainable lending business. On Lendsqr’s platform, well-structured processes have been set up for individuals who choose to become money lenders.
4. Don’t extend beyond your locality
The money lending business is most successful when lenders stay within their localities. As a lender in Nigeria, it is advisable to only negotiate with a borrower in Nigeria. As a lender, you have a higher chance of success when you limit your operation to your locality because you have a better understanding of your local marketplace. Invest in what you know and where you know.
5. Be transparent
Your authenticity and transparency as a money lender will attract borrowers to you in a big way. Never put on a façade.
A transparent lender will attract a transparent borrower. Lenders encounter different types of borrowers and it’s the transparency in the lender’s transactions that allows a transparent borrower.
Due to the high risk of the lending business, some lenders mitigate risk by asking for collateral, which is eventually evaluated. This requires transparency in dealings.
Learn the business of lending today because seeing how much income banks and major lenders make from their loans is enough to get some individual interested in lending out some of their money, hoping to make good gains in interest payments over time. A combination of economic incentives and new technology allows more people to effectively become lenders and get some good returns on money that they have in their low-interest bank accounts.