Loan company is an organization that lends money to individuals. Loan companies were organized chiefly to combat loan sharks (moneylenders who charge an illegal or high rate of interest). The personal finance company has been the most common type of successful small-loan company. It has taken much business away from the loan sharks.
The personal finance company is founded upon the Uniform Small Loan Law. This law was devised by the Russell Sage Foundation in 1916 and has since been adopted by many states. The basic law entitled companies to lend money in small sums, with or without security, and set maximum interest rates. Loan companies are licensed and supervised by state banking authorities.
Many loan companies require only that the borrower’s note be endorsed by two other acceptable parties. But most loans are usually made to individuals on the individual’s signature. No comakers or endorsers are necessary. A chattel mortgage on the household goods or an assignment on wages is the most common security. Usually the loan is repaid in installments.
Today, loan companies face severe competition from credit card companies. Credit cards provide users with access to small loans for purchases with greater speed and ease than do loan companies. Credit card interest rates also are usually lower than those charged by loan companies.
