Moneylenders lend both small and large amounts of cash, usually at higher rates of interest. Higher interest rates may be charged because the moneylender is exposed to a higher risk of defaulting than traditional banks because of various reasons.
When people need money urgently but may not have access to bank accounts, have bad credit, or unable to get money from family members or friends can approach alternative lenders who offer credit facilities. The relevant authorities typically regulate moneylenders. The government controls the process of money lending following stipulated rules and regulations.
All money lenders are required to have a license and should be aware of the procedure carried out when obtaining a moneylender’s license.
Issuing a License
A money lending license is granted within a specified period after submitting the application form. After the application is received, it usually remains valid for a year. Several factors come into consideration when issuing, endorsing, or renewing a license. These include the following:
- Competency- Whether the individual can run a money lending service
- Premises- Whether the individual’s premises are appropriate for running the business
- Public Interest- Impact of granting permission
To get a money lender’s license, here are some of the documents that are required:
- Application Form
- Passport Size Photos
- Specimen signatures
Applying for a License
Getting a money lending license involves the following steps:
- Visiting the licensing office
- Receiving the application
- Entering the details required in the application form
- Submitting the form
Importance of Applying for a Moneylender’s License
You need permission from the government or state for you to have a legal money lending business. You need a moneylender’s license. This permission is granted by obtaining the necessary licenses for a money lending service, especially when being a money lender is your primary business.
When starting a money lending service, you need to determine the types of loans you will be issuing. A successful money lending business requires a business plan and licensing.