Funding Your Investment
Whether you’re buying a new home or thinking about investing on a property or business, you will most likely need sufficient funding.
Your next step will usually lead you to various ways on how to acquire the funds that you need to finance your venture.
Where do you go for funding and financial advice? You might consider applying for a loan at the bank or from a private lender.
Banks versus Private Lenders: The Real Deal
Which one can provide you with the most benefit?
In order to come up with a good decision, you have to weigh your options carefully. Every person’s financial need is unique.
Therefore, it helps to identify the pros and cons of each option to determine the one that can best address the need.
Banks are considered as traditional or conventional lenders. Mortgage loans from banks are the most well-known types and are the most sough-after financial solution.
However, bank loans do not come up as free from downfalls. Some individuals, investors and even business may not qualify for a mortgage from the bank.
To address such concern, they can rely on other options such as private money lenders.
Private lenders offer funding solutions when mortgage loan applications from banks are declined.
Bank Loan Application
Banks have strict guidelines when it comes to loan applications.
They have credit investigators that conduct background checks on the borrowers on top of thorough review of their credit history.
Furthermore, banks require a number of documents during loan application.
These include several forms that need to filled-up, bank statements, proof of income, land titles, list of assets, business license and employment certificate among many others.
Depending on the borrower, the bank may require additional requirements that best suit the type of loan applied for.
For this reason, a lot of individuals find it inconvenient to apply for a loan from a bank.
Thus, they look for alternative financial solutions that require less requirements and paper work with no background checks.
Advantages of Private Money Lenders over Banks
Private money lenders tend to attract borrowers because they offer convenient and easier access to funds by making the loan application process simple and faster.
Borrowers can also get tips and advice from private lenders on how to increase their chances of getting approved for a loan.
Here are the top advantages of private lenders over banks;
No Checking of Credit History
A borrower’s credit score is important for banks. This is not the case with private money lenders.
In fact, they don’t base their loan decision on the borrower’s credit history. They simply evaluate the borrower’s capacity to repay the loan through the documents presented.
This makes private lenders appealing to individuals with complicated credit history and unstable income.
Less Requirements and More Flexibility
Private lenders usually require very few financial documents. Their conditions are less stringent with few conditions for approved funding.
Borrowers can even negotiate for better terms and more flexible guidelines.
Private money lenders don’t take weeks or months to come up with a decision whether to approve or decline a loan application.
It usually takes only 1-2 days for them to review an application and come up with a decision.
Additional requirements may be requested to strengthen the case which may extend the process for a few more days. Some cases can be pre-approved within one day.
A Private Lender could be Anyone
A private lender could be your parents, siblings, cousins or friends – anyone within your primary network.
It can extend to include your secondary contacts which consist of your colleagues and friends of colleagues.
If you can acquire funding from any of these people, you can expect better terms and practically lesser requirements.
However, it puts your relationship on the line. Therefore, your main investment for this source of funding would be your credibility and capacity to keep valuable relationships.