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Private Money Lenders

Sonia Nair Jan 23, 2019
As compared to conventional lending institutions, private money lenders are more lenient towards those with bad credit ratings. Here is some information about such lenders.
A poor credit rating is often associated with many hardships. A person with a poor credit history and a really bad credit score may not be able to qualify for any loans from banks or conventional lending institutions.
If the person is in urgent need of fast cash, he may try for guaranteed high risk personal loans. In such cases too, he must fit into the eligibility criteria. If he cannot, there are very few options left to arrange the required finance. He/she may either borrow from friends, relatives or neighbors, or approach private money lenders.
While those with a bad credit rating approach private lenders for loans; there are some borrowers who take loans from such lenders, only because of the convenience of the transaction. As compared to conventional lending institutions, private loans have no lengthy procedures, and you get the loan amount at the earliest.

Who are Private Money Lenders?

Most of the conventional lending institutions do not entertain loan applications from a person with a bad credit rating. This is due to the high risk assumed by the lenders in dealing with such people. However, private lenders are not much concerned about the credit rating of the borrower.
A private money lender can be an individual, group of individuals, or a small company that lends money at high rates of interest. Such bad credit loans are often associated with low credit restrictions, and are ideal for those with bad credit ratings.
Some people take loans from private money lenders, as they don't have enough time for the lengthy procedures of conventional lending institutions. Fast processing is another advantage. In other words, the loan amount is credited within a short duration.
Apart from those with bad credit ratings, real estate is another domain where these money lenders are involved. There are many people, who take loans from these lenders for purchasing or refinancing real estate. Some of these lenders deal exclusively for real estate only.

Loans From Private Money Lenders

Before resorting to loans from such lenders, you must have a basic understanding about how private money lending works. As providing loans for people with bad credit is highly risky, these money lenders often charge high rates of interest and fees.
In most cases, the loans are given for a short term that can range between 30 to 180 days. The interest rates can be anywhere between 12 to 20%. It has been noticed that, in most cases, real properties are used as collateral for such loans. In some cases, other types of assets are also entertained by these lenders.
The lender has to be provided with all details regarding the property that is being used as the collateral. He may even inspect the property. After that, he will decide the terms and conditions for the loan, and the loan amount will be fixed after evaluating the loan to value ratio.
The loan amount is decided as per the value of the property. In general, around 65% of the value of the property is given as loan amount. Most of these loans are sanctioned on the condition that, in case of default, the property will be seized by the lender, after the stipulated grace period.
If you approach private money lenders for personal loans, you have to furnish proof for the source of your monthly income. Such payday loans are extended for a short period of around two to three weeks, and the borrower has to repay the loan amount along with the charges, as soon as he receives his next paycheck.
If you want to find such money lenders, you may conduct an online search for this purpose. Sometimes, you may get information about them from newspaper classifieds too. Even your friends and relatives may have some knowledge about such lenders.
Once you get information about private money lenders in your area, approach them, and get a clear idea about their terms and conditions. Choose the one, who offers a comparatively lower interest rate. However, make sure to understand the terms, before signing the documents.
Disclaimer: The content is for informational purposes only, and should not be used as a replacement for expert advice.