Benefits and drawbacks of dealing with private lenders
This is not uncommon that a person is walking into a bank for taking out a loan, but walking out without any positive response. This is even truer for people who have a bad credit profile. Banks and other conventional financial institutions often decline the loan application of people with unhealthy credit. In such a situation, the only option left for such people is to borrow loans from the private lenders. Such lenders offer loan to any people, irrespective of credit profile. So, if you’re also facing challenges in getting a loan to cope with emergency cash crunches of your life, you may go to a private lender to take out a personal loan.
How private lenders work
Private lenders are people or group of people who utilize their money by giving loan to people and make profits by levying interests on the loan amount. Generally these lenders prefer to lend money to the entrepreneurs who are involved in real estate business or have a robust business idea, as they can afford to pay higher interest rates than common people. However, private lenders lend money to the individuals also. At the same time, most of these lenders prefer to invest in higher risk ventures; they are ‘specialists’ in this field. They understand both the risks and profit margin associated with high risk businesses. They lend money depending on the appraisal of the asset or business for which the borrower is taking out the loan. Generally these lenders lend money for no longer than 5 years.
Benefits of working with private lenders
Traditional money lenders often decline the loan application of people who have so many open lines of credit or want to fund repairs on a home bought for cash. Conventional lending institutions usually don’t want to invest money in property which is not owned for at least a year. This is known as ‘seasoning’ in the property market. Moreover, if the applicant has a history of foreclosure or bankruptcy, then the situation becomes even worse and thus the chance of getting a loan from banks or credit unions becomes too little. Taking out a loan from the private lenders is perhaps the best and most legitimate option under such circumstances.
Drawbacks of working with private lenders
Private lenders come handy while bank, credit unions and other conventional financial organizations refuse to lend money to a borrower that fails to meet their eligibility criteria. But when it comes to getting a loan from a private lender you must be very careful choosing the right one. The market is flooded with fraudulent private lenders. Unless you choose the right and a legitimate lender, you may become a victim of such a lender and this is the main drawback of working with a private lender. Rapacious lenders tend to take advantage of your distressed condition. You’re more susceptible to become a prey, if your credit profile is unhealthy. Poor credit profile confines a person to get an unsecured loan from a conventional lender. Automatically, such people knock the door of private lenders without verifying their legitimacy.
How to check the legitimacy of private lenders
If you’re in need of taking out a loan from a private lender, make sure you check the following points before submitting your loan application. The points would help you verify the lender’s legitimacy and also report a scam, if applicable.
Keep track of the communication – First of all, you must document all the communications you have with the lender. Also note down the time, date and gist of the conversation you have with the lender. Don’t forget to take a note of the commitments he makes about repaying the loans. If he sends voice mails, make sure you record the mail and for emails, take print out of the mails.
Preserve all relevant documents – Don’t misplace any relevant documents like cancelled check, bank statement, loan agreement or any statement given by the bank stating that the fund was not deposited or the check was returned due to inadequate funds. If possible, ask the bank for providing you with the routing number.
Instruct your bank – Instruct you bank to accept the money transferred by your lender or approve payments or transfer request to your lender.
Assign a private investigator - If the lender cheats you, you may recruit a legitimate private investigator. Contact the person and tell him about the incident you faced. Now ask him to document this scam and also ask him about his working procedure. If he accepts your offer and takes up the case, and collect sufficient proofs to establish the fraudulent activity that you have become the victim of, you call the respective authorities and report the scam.
Search through personal loan search engine – This is a great option to find legitimate online private lenders. There are some websites that help people find cash next business day online by adding the most legitimate lenders of the industry to their network. The interest rates charged by most of these lenders added to these sites range between 5 percent APR to 32 percent APR depending on the credit profile of the borrower.
While looking for private lenders you must consider the above-mentioned points. These would help you find and deal with a good lender that offers favorable loan terms and reasonable interest rate.
If you’re in search of genuine and non-rapacious private lenders for getting funding for you small business, you may search through our websites. We will help you finding the maximum loan amount with minimum interest rates from the good lenders of the industry.