Financial service sectors that offer loans and credit to the consumers are solely responsible for the responsible and irresponsible lending.
Define responsible lending:
When the lender acts in the interest of the borrowers, it is known as Responsible lending.
Define irresponsible lending:
On the other hand, when lenders mislead the needy borrower for their own advantage, this is known as irresponsible lending.
Responsible Lending:
Responsible lenders make sure that the borrowers understand the terms and conditions of the loan well. Responsible lending ensures affordability to the loan consumers and supports them when they face any kind of difficulty during repayment of a loan. A lender will be termed as a responsible lender when he meets the responsible lending obligations. To meet the responsible lending obligations, the lender is required to meet the mentioned below steps:
1. It is essential that the lender should make reasonable enquiries about the borrower’s financial condition, his requirement and financial objectives before lending him the loan or credit.
2. It is also important for the responsible lender to verify the financial situation of the loan consumers.
3. The lender should make an initial estimation about the borrower credit condition and make sure if the loan deal is suitable for him or not.
4. The lender should take an account of the actual monthly income of the borrower to determine the lending decision.
5. It is required to make sure that the borrower is affordable to pay off the loan amount back on the due date.
6. Lenders should recommend only those loan proposals to the loan consumers that are financially feasible for them.
7. The lender should regularly meet the Administrator to explain how the guaranteed loan is being serviced.
Some of the Responsibilities of the lenders towards the loan borrowers:
• When the borrower asks for the preliminary or final assessment, the lender should provide it to the borrower with a written copy.
• The lender should remain transparent to the consumers about the term and conditions of the loan.
• The principal amount and the interest rates should be reported to the borrower for each guaranteed loan.
• Lenders take reasonable steps to make sure that the borrowers are treated fairly and getting the benefits of the loan.
Irresponsible Lending:
Inappropriate behavior and practices constitute irresponsible lending. Lenders irresponsibility is the main cause that borrower’s are falling with debt problems. Some of the things that make the lender irresponsible are as follows:
1. Irresponsible lenders extend the credit limit of the borrower without even taking the permission of the borrower. When a lender extends the credit limit without letting know the borrower, the borrower may end up facing arrears and late payment fees.
2. Irresponsible lenders aimed with false statement of facts in the loan agreement.
3. Mislead the genuine and desperate borrower with advertisement and send the loan/credit cards via the post.
4. The irresponsible lending is in the news that lend the money to the people who just cannot afford and thereby end up charging huge interest rates and late fees from them.
Define responsible lending:
When the lender acts in the interest of the borrowers, it is known as Responsible lending.
Define irresponsible lending:
On the other hand, when lenders mislead the needy borrower for their own advantage, this is known as irresponsible lending.
Responsible Lending:Responsible lenders make sure that the borrowers understand the terms and conditions of the loan well. Responsible lending ensures affordability to the loan consumers and supports them when they face any kind of difficulty during repayment of a loan. A lender will be termed as a responsible lender when he meets the responsible lending obligations. To meet the responsible lending obligations, the lender is required to meet the mentioned below steps:
1. It is essential that the lender should make reasonable enquiries about the borrower’s financial condition, his requirement and financial objectives before lending him the loan or credit.
2. It is also important for the responsible lender to verify the financial situation of the loan consumers.
3. The lender should make an initial estimation about the borrower credit condition and make sure if the loan deal is suitable for him or not.
4. The lender should take an account of the actual monthly income of the borrower to determine the lending decision.
5. It is required to make sure that the borrower is affordable to pay off the loan amount back on the due date.
6. Lenders should recommend only those loan proposals to the loan consumers that are financially feasible for them.
7. The lender should regularly meet the Administrator to explain how the guaranteed loan is being serviced.
Some of the Responsibilities of the lenders towards the loan borrowers:
• When the borrower asks for the preliminary or final assessment, the lender should provide it to the borrower with a written copy.
• The lender should remain transparent to the consumers about the term and conditions of the loan.
• The principal amount and the interest rates should be reported to the borrower for each guaranteed loan.
• Lenders take reasonable steps to make sure that the borrowers are treated fairly and getting the benefits of the loan.
Irresponsible Lending:
Inappropriate behavior and practices constitute irresponsible lending. Lenders irresponsibility is the main cause that borrower’s are falling with debt problems. Some of the things that make the lender irresponsible are as follows:
1. Irresponsible lenders extend the credit limit of the borrower without even taking the permission of the borrower. When a lender extends the credit limit without letting know the borrower, the borrower may end up facing arrears and late payment fees.
2. Irresponsible lenders aimed with false statement of facts in the loan agreement.
3. Mislead the genuine and desperate borrower with advertisement and send the loan/credit cards via the post.
4. The irresponsible lending is in the news that lend the money to the people who just cannot afford and thereby end up charging huge interest rates and late fees from them.
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