What is Private Money Lending?

It is a well known fact that the only thing which is constant is change. For example, few years back, if someone was looking for a loan then he/she has just one option and i.e. to go to a bank. But the banks used to take a lot of time for sanctioning loans, as the process involves a lot of documentation.

Due to these factors, real estate investors used to suffer huge losses. But nowadays, no one can afford to waste money and therefore, the real estate investors have found an alternative in the form of private money lenders. So, banks and traditional lenders are a big NO nowadays.

The reason behind the massive success of private money lenders is their availability and swift processes. The money lending process of banks and traditional institutions is complicated and laden with massive documentation. On contrary, the private money lender will incorporate easier process but with higher interest rate due to involvement of higher risk on the money lenders’ side. The main requirement to qualify for a private money loan depends upon the ability of the borrower to pay off the loan amount.

Be Aware of Fake Private Money Lenders

Although, there are several private money lenders, who are absolutely fair in their business dealings and are aimed to make a profit by funding loans to people who might have trouble in securing their credit through traditional borrowing channels like banks and credit card companies. But few of them are dishonest and will take advantage of people who are in a financial crunch and worried for a short-term cash infusion to bridge the gap to their next source of income. So, it is advisable to select a suitable private money lender after conducting the market research.

While finding via private money lender, you may come across a pawn broker or some check cashing services. Pawn brokers fund loans using the items of personal property as collateral for the given loan. Anything let’s say jewelry or any other item of personal property can be used as collateral against the loan funded by pawn broker. The pawn brokers cost higher interest rates to the borrowers.

Check cashing services provide a loan to the based on a post-dated check from the borrower. The check cashing service will pay the borrower lesser amount as compared to the check written by him. The check cashing service thus earns a huge amount of profit when post-dated check clears in the future. So, the selection of a suitable private money lender will define the profit or loss of your investment. Be aware of the scammers.

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