The two main actors in the credit environment are the lender and the borrower, two figures who make this crucial financial process work for businesses and individuals. Following that, their characteristics, importance, and responsibilities will be reviewed.
According to the Bank of Mexico, one of the two most popular sources of financing is commercial banking, with 33.7% of businesses choosing this option between January and March of 2022. Likewise, it is critical to understand the role of those who obtain credit and those who benefit from it.
Characteristics and distinctions between lender and borrower
A financial loan is dependent on these two figures, and each has specific functions and responsibilities during the credit-granting process.
This is the person or entity that lends a certain amount of money on credit to an applicant, who is the borrower, who must repay the amount borrowed, plus the interest agreed upon in the contract, within a predetermined time frame.
Interest rates vary depending on a variety of factors, including the risk that the loan represents for credit grantors, as well as the amount and credit history of the applicant.
Commercial and non-commercial entities, banking and non-banking institutions, and individuals can all be lenders.
It refers to the party requesting the loan, who receives the resources from the credit grantors and agrees to repay the money received, plus interest, in accordance with the terms of the signed contract.
Individuals, businesses, and organizations of all sizes can be borrowers.
What is the distinction between them?
Having established the preceding, the difference between borrower and lender is essentially the role in the credit process, with the lender providing the credit and the borrower receiving it, always under established conditions.
Lender and borrower obligations
Because each element’s role is clear, it is critical to understand what they must commit to during the credit granting process.
Obligations of the Lender
• You must grant the borrower’s requested amount.
• Make it clear in the credit contract how much interest must be paid, what percentage, and how long it will take to pay off the debt.
• Maintain a copy of the contract.
• Always provide proof that client payments were received.
• It must enable the borrower to repay the loan entirely.
Obligations of the Borrower
• Pay the established fees in full and on time.
• Pay any commissions, interest, penalties, or additional charges that the loan entails.
• Provide information about your financial situation and tax data to the lender (if requested).
Learn about the ideal credit-granting software
For lenders, CRiskCo’s API is an ideal tool for carrying out their processes correctly; with it, they can get to know their borrowers very well and offer them the opportunity to obtain financing based on their needs.
This software provides credit analyses that incorporate artificial intelligence, complete fiscal data, and the current situation of clients, so that financial entities can offer the best financial products to their users while maintaining a low risk in credit granting.
Try CRiskCo’s API to increase the productivity of your business.
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