Lender

Lenders include banks, credit unions, building societies, online lenders and, in some cases, governments, businesses and individuals. When you put money in a savings account, you are effectively lending to your bank. When you buy a bond, you are lending to the company or government that issued it.

Lending carries risk, because the borrower might not repay. Lenders charge interest partly to be paid for this risk and partly because they could have used the money in other ways. Higher-risk borrowers usually pay higher interest rates.

Before lending, lenders assess borrowers by checking income, existing debts, credit history and the purpose of the loan. They may ask for collateral, such as a property or vehicle, which they can take and sell if the loan is not repaid.

The lender sets the loan terms, including the interest rate, the repayment schedule, any fees and what happens if payments are missed. Reading these terms carefully matters, because two loans of the same size can cost very different amounts.

Note: Creditor means the same as lender in most contexts. A creditor is anyone who is owed money, including suppliers who have not yet been paid.