How to Get Personal Loan From Private Loan Lenders
When you compare personal loans to a credit card, personal loans often have much lower interest rates and can easily be attained.
There’s no reason your inexperience with lenders should deter you from getting a private lender personal loan to improve your financial standing. If you want to improve your financial health, it’s important you know what your options are and consider whether or not you should get a personal loan.
Is A Private Personal Loan Right For You?
Public lenders, Private Lenders and Payday Loan Lenders
First off, before you make any kind of financial venture, it’s important you know what the difference is between a private lender, public lender and payday loan lender.
The difference between private and public lenders is that private lenders are not credit unions, financial intuitions or banks. Private lenders are actually individuals or companies that loan money out. They’re often provided money based on the relationship they have with the private lender.
When it comes to private lender personal loans, you don’t have to say where the money is going – for what personal reason you have to spend it. With public financial institutions – banks and credit unions – you must inform them how that money is used – car loan, student loan or mortgage loan.
A personal loan is not the same payday loan. Payday loans are exorbitantly high interest, short-term loans that often requires no credit check. Payday loans are given out to people who need money until their next paycheck. However, a personal loan tends to have lower interest rates, with longer terms associated with it and often involves a credit check.
Both these loans can come from a private lender, but it’s the payday loan lenders that people need to avoid. Why? They charge interest as high as 700 percent and have massive fees if you don’t pay them back right away.
There are two kinds of private lender loans – unsecured private loans and collateral. Private personal loans have a higher interest rate and need some type of note that will cover the lender in case you fail to pay the loan back.
Should You Get A Private Personal Loan
There are all kinds of reasons to get a private personal loan instead of the traditional bank loan.
For instance, if your credit isn’t as good as the bank requires, which often use credit scores to determine approvals or denials, a private personal loan will find ways to help you get the money you need no matter what your score is.
Remember, traditional banks use your credit score to accept or deny your loan application. With private lenders, the approval process is much simpler. You just need to show them that you have income as well as have assets that can be used as collateral.
Another reason a private personal loan is better is that you can quickly get access to the money. With traditional banks, you have to fill out all sorts of tedious paperwork. Private lender loans offer money – from start to finish – within two to three days.
Here’s s something you need to understand - a private personal loan is cheaper than credit cards, but are more expensive than a loan you’d get from a bank.
Are There Any Risks To Attaining A Personal Private Loan
If you’re wondering if you should get a private personal loan, it’s important you look at the risks – like you would for any financial decision. There are some big risks when you get a loan from a private lender that you should be aware of:
Private loan lender often charges more because their access to the funds isn’t cheap. A personal bank loan may run you six to seven percent annually. A private loan lender may charge up to 17 percent with increasing costs as time goes on.
The payback period of private loan lenders is often quite low – 24 to 36 months on average. For that reason, their monthly payments tend to be higher along with the high-interest rates. Why? Lenders want to see a quick return on their investment.
Should You Use Other Alternatives Instead Private Personal Loans
When it comes to deciding whether or not you need a private personal loan, consider what kind of return you could get from the purchase. Does it outweigh the cost? Is it worth borrowing the loaned money?
For instance, you don’t want to borrow money to fund your entertainment, which has no return on it. If you use it purchase business supplies or for your education, then the return generated may be worth seeking a private loan.
Once you’ve determined that you do need money to fund a purchase, consider how much money (cash) you can put forth toward it. Is there any money in your savings that you could put toward the purchase? Or, can you wait for a short time to build the cash up to fund some of the investment along with the loan?
When you use cash to fund some of the investment, it can reduce the interest you pay on the loan. And, if you save up, you may not ever need a loan. Cash is definitely a better option if you want to go with a consumption-based purchase such as new TV, vacation or any other investment that offers no type of return.
Explore Traditional Bank Loan Alternatives Before You Settle On A Private Personal Loan
Before you decide to go with a private personal loan, you may want to consider any other alternatives. Don’t forget that personal private loans tend to have higher interest rates, bigger up-front costs and strict repayment terms than other methods such as:
Line of Credit – Think of this as a cash advance that lets you borrow money to buy supplies and goods. Good credit tends to play a role in accessing these kinds of loans, but those who have bad credit have been known to get them as well.
Credit Card – If there is a one-time expense you need to fund – unexpected trip costs, dental visit, doctor visit, etc. – then a credit card is going to be your better option.
Public Loans – There are an array of places you can turn for a public loan – financial institution, bank, the federal government, the local chamber of commerce and even non-traditional private lenders. Now, these loans tend to come from subsidized or federal fund programs with better terms and lower, fixed interest rates.
When You Need A Loan For Higher Education
If your goal is to get money for school, you want to look at public student loan options before you opt for a private personal loan. In fact, a personal loan for school should be your last resort when you need money for education. In order to qualify for federal student loans, you’ll need to turn in an online FAFSA application.
Federal student loans tend to be much better for borrowing since they come with low, fixed interest rates – from three to eight percent. The interest rate offered is based on the kind of loan you end up getting. Congress sets the interest rates on the federal student loans.
Private lender loans’ interest rates, however, are often higher than seven percent and how much they charge is based on the private lender.
What Your Other Personal Loan Options?
Check Out Private Lenders
When it comes to private lenders, they may be companies or individuals. A private lender can be a family member, friend, business acquaintance or anyone that is interested in making the investment and providing you a loan.
Private lender companies are usually investment firms, venture capital firms, specialized private lenders and peer-to-peer lenders. The best thing you can do is put your attention on only those accredited and government approved private lender companies. Or, you can go with trade or business organizations to do a private lender search.
Once you know where to go for your private lender personal loans, look at each option to get the best deal. Attain quotes from a minimum of three separate businesses – more if you want – to choose which one would be best for you. Negotiate if you can.
Many people assume that the initial quote is the final offer, and in most cases, that’s not true. Rates can often be talked down if you can show them that you have better offers. If you can offer them collateral without a risk to you, do it. Collateral often reduces the interest rates you are charged.
Consider visiting CreditKarma.com, Bankrate.com or CreditSesame.com to compare the rates.
Look At Peer-to-Peer Lending Websites
There have been a plethora of peer-to-peer lender websites hitting the Internet – think Prosper. These companies let potential borrowers create a profile and list a loan amount they need. Its members will act as a lender, contributing minute amounts or large amounts to fund the asked loan. The company will collect the money donated and give it to the lender who then pays it back to the company.
These lenders often have strict standards when it comes to credit and income. If approved, you get designated a risk level, and the interest rate will be based on that. Credit standards tend to be less the traditional banks, which is why you should consider this option for when you need money.
This lending option ensures you get your money quicker than a traditional bank loan – sometimes it’s the same day as you have asked.
Prosper.com and Lending Club.com are the two top U.S. peer-to-peer sites. All you need to do is visit their websites to find out how to open your account. You can also check out the other available peer-to-peer lending sites by doing a little research.
Looking At Specialized Private Lenders
There are some companies, known as specialized private lenders, where their focus is on offering personal loans. Get into contact with the local Better Business Bureau to find those companies who specialize in these loans in your area.
Reach Out To Your Family and Friends
Private lender personal loans don’t have all the bells and whistles that go with traditional bank loans. When asking financial assistance from a family member or friend, you can have an oral agreement about the private personal loan (if you wish). It’s best though to have this information written down in a contract – including how much money they are loaning you, what the repayment terms are, etc.
When asking money from these folks, approach the circumstance like you would a bank loan. Have documentation in hand about your creditworthiness, show them proof of income – how much you make and what your current finances are like. While some folks won’t care to see this, others will.
Make sure you're flexible about the loan amounts and the agreement terms. If you can do this, you may not have to pay any interest on the loan.
Special Note: If you decide to go with this method, it’s important you understand that not paying the loan back can damage the relationship you have with this person. Before you ask anyone that you know and love for money, make sure you have the means to pay the back.
What You Should Have Before You Ask For A Loan
You must make sure that your look as financially good as you. You want to be creditworthy for these folks to say “yes.” Be sure you can prove that you have income, savings, other investments and physical assets that can secure the debt. Have all this documentation in hand when asking for a loan.
What You Should Always Keep In Mind Before Borrowing Money
If you fail to pay a loan back, it can hurt personal relationships you have.
Do not ever go with a payday loan lender. Besides the exorbitant fees they charge and other requirements, they are not FDIC-approved banks and shouldn’t be trusted with your confidential information.