How Money Lender Works to Make Money

Many banks and money lender companies are usually in the industry to make money similar to the ways in making money trading. Generally, financial institutions pay at an interest rate lower than pay at an interest rate which is lower on the account of the depositor. They typically use this money for the borrowers to lend over a high-interest rate. Basically, this comes in the form of loans and credit cards.

The cost of borrowing from a money lender

When you’ll see the fine prints covered under credit card agreements, you will see the basic information that you may need to understand once you agree on this money lending contract. Below are the basic things to know to be able to clearly understand what is inside the credit card agreement.

Credit Cardholders’ Bill of Rights or the 2009 Credit CARD Act covers the protection for credit cardholders.


Normally, the interest is the amount the borrower will pay for the chance given in using the money of someone. Some credit card companies offer interest for as much as 25 to 30 percent.


The way credit card works are through the imposition of annual fees. Once a credit cardholder, you are required to pay the annual fees every year regardless if you use the card or not. Additionally, late payments are also covered and charged with specific fees by most credit card companies and banks.

Finance Charges

Usually, financial charges are provided through the annual percentage rate or APR which is the complete total of the interest and other fees added.

  • Ways to figure out the interest

Generally, the APR of the annual percentage rate is computed on a yearly basis. However, you’re not charged with interest annually. The interest that is being charged is actually provided on a daily basis.

Calculation of the APR:

Divide the APR on the number of days stated in the credit card agreement. Basically, this is either 369 or 365. Moreover, the answer to this will reflect the interest rate as an everyday compound. 

Credit Score Definition

Basically, the computation for the credit score is computed based on the details provided in the borrower’s credit report. Most money lenders utilize this credit score in order to quantify the risk involved in lending money as well as the interest rate that they will offer. 

Usually, the best interest rates are granted to applicants garnering the highest scores. Moreover, most money lenders are good at using credit scores compared to credit reports. This is due to the fact that credit scores eliminate those extensive details regarding your financial history.