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How Financial Intermediaries Affect Lending

Financial intermediaries are integral to any financial system and are necessary for the best forex trading to occur. An economy functions to the transaction of money and on a greater scale through the transactions that take place between lenders and borrowers. A person with a surplus of money may wish to have in investment opportunity where they can see a return in a specified time frame known as maturity.          

Financial intermediaries are integral to any financial system and are necessary for the best forex trading to occur. An economy functions to the transaction of money and on a greater scale through the transactions that take place between lenders and borrowers. A person with a surplus of money may wish to have in investment opportunity where they can see a return in a specified time frame known as maturity.
To engage in direct lending is very risky because an individual is at a disadvantage when it comes to evaluating borrowers. This is why indirect financing is both beneficial for the lender and the borrower. The financial intermediary takes on a lot of this overhead and provides qualified borrowers to which a lender can give a loan to in exchange for a financial claim in which interest payments will be made.
Another service that financial intermediaries can provide is that they are able to create securities with a wide range of maturities from one day to more than 30 years. Plus they are able to buy directly and issued by the borrowers an issue in direct securities with precisely the maturities (usually shorter) desire by the lenders. For example, savings and loans associations obtained funds by issuing passbook accounts and savings certificates and invest the funds and long-term consumer mortgages.
If a lender had a specified maturity date of let's say 15 years then he will have a hard time trying to find a borrower who only needs the money for a car repair. What a lender needs is a venue in which there is a large amount of borrowers who are qualified. In addition he also needs to be able to set the terms in which the principal is repaid and that is why a financial intermediary is vital to our economy and necessary when it comes to taking advantage of forex trading tips. Because they can provide what a lender cannot receive easily when issuing loans directlyComputer Technology Articles, intermediaries play a large role in our society.

Article Tags: Financial Intermediaries

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ABOUT THE AUTHOR


Rhab Hendrik is an author who shares his best forex trading articles with others. He can always be counted on to bring you the latest forex trading tips and detailed forex trading strategies.



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