What is a moneylender?

A Moneylender is an individual or group that usually lends relatively small amounts of money at very high rates of interest. They say they charge more than established banks do because their lending tends to be riskier.

This risk is often due to the lack of collateral and the informal assessment of creditworthiness, which characterizes much of their transactions.

For some, the only choice

For most people with no bank account, and bad credit histories, as well as those with too much debt (so banks won’t lend them anymore), who do not have relatives or friends who can offer a loan, going to a moneylender is their only option.

Throughout history, moneylenders have earned the bulk of their living by preying on vulnerable people, as well as gamblers and compulsive shoppers who have built up considerable debts.

For thousands of years, moneylenders have been notorious for preying on desperate people and using threats of violence on anyone who is late in paying back.

In most countries today, there is legislation that limits how much moneylenders can charge. In India, for example, they need to be registered and are governed by Money Lenders Acts in different states.

Many moneylenders are predatory – they actively seek out vulnerable individuals in financial trouble who have nobody else to turn to.

Loan sharks are people or firms that lend money at outrageously-high interest rates. The term may be used for legal moneylenders or illegal ones – what they all have in common are their exorbitant interest rates.

Moneylender is Geldverleiher in German, prestamista in Spanish, prêteur in French, agiota in Portuguese, ростовщик in Russian, and 金貸し in Japanese.

Are banks moneylenders?

Banks lend money, so why aren’t they included in the definition of moneylender?

A moneylender (one word) refers to a specific type of lender.

When talking about proper banks, we could use the components of the term ‘moneylender’, but would need to separate the two words, i.e. a bank is a money lender (banks also take deposits).

The meaning of usury

Usury refers to the practice of making immoral or unethical loans that unfairly enrich the moneylender.

If the lender charges exorbitant interest fees and demands other conditions, the loan may be considered usurious.

In Christian societies in the past, and several Islamic ones today, the simple act of charging interest, no matter how small, can be considered usury.

A usurer is a person who practices usury. A loan shark is a usurer.

According to the Macmillan Dictionary, a moneylender is:

“A person or organization that lends money to people, especially at a high rate of interest.”

Modern financial systems increasingly advocate for microfinance institutions as ethical alternatives to traditional moneylenders, offering more reasonable interest rates and community support.

Vocabulary and example sentences

There are many money-lender related compound nouns in the English language. A compound noun is a term consisting of at least two words. Let’s take a look at six of them, their meanings, and how we use them in a sentence:

  • Moneylender Practice

The activities and operations carried out by moneylenders in the business of lending money.
Example: “The new regulations aim to oversee the moneylender practice more closely to protect borrowers.”

  • Moneylender License

A formal permission granted by authorities to an individual or company to operate as a moneylender.
Example: “Every legitimate moneylender must acquire a moneylender license to operate within the city.”

  • Moneylender Agreement

The contract between a moneylender and a borrower detailing the terms of the loan.
Example: “Before accepting the loan, she carefully reviewed the moneylender agreement to understand the terms.”

  • Moneylender Law

Legislation that governs the lending practices of moneylenders.
Example: “The government introduced a new moneylender law to curb exorbitant interest rates.”

  • Moneylender Network

A group or association of moneylenders who operate within a particular region or community.
Example: “He found it challenging to borrow from the local moneylender network due to his poor credit history.”

  • Moneylender’s Fee

The charge or commission taken by a moneylender for providing the loan service.
Example: “The moneylender’s fee was unexpectedly high, adding to the overall cost of the loan.”

Video – What is a Moneylender?

This educational video, from our sister channel on YouTube – Marketing Business Network, explains what ‘Moneylender’ means using simple and easy-to-understand language and examples.