Private money lending is exactly what the name implies: a loan given to a borrower by a private organization or a wealthy individual. Traditional money lending is an established contract between a borrower and a financial institution, so private money lending is an alternative means of obtaining funds. Private lenders are in the business to make money with their investments. The process to obtain borrowed money generally varies, but it’s entirely up to the lender and the borrower to establish the exact terms of a loan.
If you’re still hungry for additional information, here are the basics of private money lending to nibble on.
The Underlying Foundation of Private Lending
Initially used by farmers who traded seeds and borrowed livestock as repayment options for the future, loans have been around for thousands of years. Humans have adapted, and the lending process has evolved to what we know it as today: a contemporary, modernized system to borrow and repay money. Our world wouldn’t be the same without its establishment.
Private lending has changed the financial industry as a whole by its foundation on the concept of funding from sources that aren’t public lending institutions. Not every potential entrepreneur is able to receive loans from banks, credit card companies, or mortgage companies. Again, since a private lender is either an individual or organization that loans money outside conventional financial methods, private lending can be widely advantageous to build up opportunities that wouldn’t otherwise exist.
Let’s Define Private Money Lending Further
To understand the basics of private money lending, we need to examine its process. Private lending results from established needs that conventional lending lacks. Private money loans are usually shorter-term loans with higher interest rates. Private lenders tend to loan against hard assets or capital such as real estate, and they also tend to have more interest in that asset than in your entire financial background.
Due to their separation from traditional financial institutions, private lenders are less controlled and can offer terms with greater flexibility. Typical investors who take advantage of such loans are those who require quick financing, such as people in real estate aiming to purchase short sales, foreclosures, or properties in need of renovation.
For People Looking for Private Funders
Private money lenders can be considered relationship-based lenders. They may even be people you know—family members, friends, businesses, or professional acquaintances. There are also established, successful private lending companies with accredited investors, created with the intention to provide private funding as a service. At Val-Chris Investments, we’re direct lenders who offer private money loans with high approval rates, flexible terms, and fast turnaround times. Contact us about a private loan for a real estate investment today.