Borrow and Lend To Make Money

Borrowing Money for lending purpose is a lesser known way for making money. But it is very effective and the results are usually better then many other methods.

When we borrow money then we are liable to pay some interest. When we lend money then we would be getting some interest. This logic is applied to make money out of it.

The logic is to borrow money at a lesser rate of interest and lend it at a higher rate of interest. I have seen many people making big money out of it.

All the banks in the world do the same thing. When we deposit money with them, then they pay very low interest rates. But when we take a loan from a bank then the interest rates are usually higher.

The key is to interact with the local area lenders and borrowers, and not the bank.

I will detail the entire process step by step:-

1. Look for lenders
 Do some research in your area and in nearby areas and look for lenders who provide loans at low interest rates. Make a list of them, and then choose the one with the lowest rate of interest, and who can provide the loan for the specified duration.

2. Market yourself as a lender
Market yourself as a lender in your area. This will make sure that the borrowers come to you directly when they need money. It helps to get a large client base, moreover it helps to remove any middle person who can come and claim his brokerage.

3. Give the loans at a higher rate
Make sure to lend the money at  somewhat higher rate then the rate at which you have borrowed. The difference in the interest rate is your earning potential. So higher the rate at which you lend, higher will be your profit margins. Make sure to verify the borrower, as there is always a risk of borrower defaulting on the money.

Now the question arises that why will the borrower take loan from you at a higher rate?
The answer to this question is that:-

1. Many times the borrower is not aware of other lenders in the market.

2. The borrower has faith in you, and is comfortable borrowing money with you.

3. Other lenders are too fuzzy, and are not good in reputation building with the client.

4. The borrower already owe other lenders some money, and can't afford to ask for new loan.

The main point is to grab the opportunity as it comes to you. I will close this article with an example which came to my knowledge some time back.

My house maid get her daughter married. She was short of money, so she took a loan from her local lender. The local lender was charging her a very high rate of interest, but still she was comfortable with that. I told her to look for other lenders or go to bank to get a loan at much lower rate of interest. But she replied that, she do not want to get in the mess of the bank, they have so many formalities and she is not comfortable with that.

That made me realize that people buy and lend on reputation basis. In-fact they are willing to pay higher rates just for the sake of comfort. There are many opportunities like these in the market, which could be tapped for money making.

That's all for now friends. Keep looking for opportunities around you for making quick bucks.

Cheers,
Amit