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Private Loan Lender

Private loan lenders can be used to finance many different types of loans.  The private loan lender may be used by a student to help them complete their education. A private lender loan may be used by an entrepreneur, to start a new business. When a bank says no; a private lender may be the best source to get a loan. Sometimes as in the case of the entrepreneur, a private lender is actually an investor.

A private loan does have its drawbacks. Since an individual is lending the money there are no universal lending guidelines.  The individual lending the money decides upon the terms of the loan. The lenders for a private loan will also determine the interest rate for the loan. The repayment terms can be harsh and the penalty for not repaying the loan can be steep.  Since this is private lending, there is no government agency to monitor private lender loans.

Private loan lenders serve a valuable purpose in society. For example; an entrepreneur may have an idea for a new invention but is not able to receive a loan from a bank. With the help of a private lender the borrower gets the resources to start a new business.

Many students benefit from private lender loans. Some students find that just as they are about to graduate they run out of money.  After a student has used all the resources available for government backed loans, they may be forced to use a private lender to complete their education. If the student did not get a loan from a private lender they may never complete their education.

A private lender will ask for collateral to secure the loan.  There is a substantial amount of risk for the private lender when they issue a new loan.  The value of the collateral used to secure the loan must meet or exceed the loan amount. The following is a great example of the importance of the collateral.  Let’s say an entrepreneur uses a private lender loan to start a new business.  The borrower then decides not to pay back the loan. The private lender may have terms in the loan that will allow the lender to take the business if the borrower defaults.

A private loan lender may be used to finance a new house. When an individual wants to purchase a house but they have been turned down by every bank and credit union; a private lender may provide the financing for the purchase. At the closing the sale of the property would actually be considered a cash sale.  The private lender will determine the interest rate charged for the loan. They will also set the terms and conditions of the loan. If the borrower defaults the private lender will typically take possession of the property.

There are many benefits to private lender loans.  A borrower that does not have any other available resources can benefit from this type of loan.  The borrower always needs to evaluate the risk and rewards of a private lender loan.