Everything You Need To Know About Private Lending
No one should have to struggle to get a loan. If you are struggling, don’t give up. There are other options to regular loan lending. Private lending is available to help those who can’t usually qualify for a loan. Private lending may be the way to go if you are having issues with the regular financial solutions. With strict lending requirements for many loans, those who are self-employed, a foreign investor, someone who is in the process of working on improving their credit, someone who “flips” houses, or starting a business, are the ones who benefit most from Private Lending.
What is Private Lending?
Private Lending is a loan that comes from private sources of finances. The private source could be a business, family, friends, or special lender. Private lenders are Mortgage professionals with a private group or individual who often join a MIC or Mortgage Investment Corporation.
In simple words, Private Lending is when this individual or group loans another person or group personal money for investing. This is an option for people to invest in property not connected to a regular lender or bank. Private lenders can provide mortgages and other loans to people who are unable to qualify to get a loan through banks, credit unions, or trust companies.
Private Lenders will be looking at your potential home as a profitable asset. Private lenders often check credit, but not all lenders look at the credit score of the borrower.
Private Lenders are absolutely legal options to banks and other lenders. They have to comply with banking laws and usury laws in the areas they operate. This means their rates will be regulated.
Private lenders can offer many things that regular lenders offer, for example:
- Home equity loans
- Bad Credit mortgages
- First and Second Mortgages
- Hard money loans
How Does Private Lending Work?
Just like regular loans, private lenders give funding for you to make purchases, consolidate debt, make improvements and renovations, or buy a property. You must then pay back the amount you borrowed, including interest. There are a couple of types of Private Lenders.
- Private lending companies: similar to banks, companies use the interest you pay as profit. These private lenders can also be called “online lenders” as they do a lot of business on the internet.
- Private lending individuals: these can be investors who make money through interest paid on the loan. They can also be people the borrower knows, who are willing to lend funds and not worried about making a profit.
Why Consider Private Lending?
There are many reasons to consider Private Lending. Below are some of the most common reasons people like Private Lending.
- Easy to Qualify: When it proves difficult to get a loan from a regular lender, you may hear the excuse that you do not qualify. Often, People who are self-employed or young won’t have the long, steady work history or credit score the mortgage lender or bank wants to see. Some people don’t have the best finances because of debt and their finances don’t look good enough to qualify for a regular loan. Private lending is easier to find ways to qualify for loans.
- Private lending works well for people who flip houses. Why? There is a short payback period if you flip the house within six to twelve months. If you renovate before you sell the house, it boosts the house’s value and looks, allowing you to be able to sell it or refinance quickly and easily.
- Private lending can help you do renovations in a short time to get a house ready for quick sale or refinancing. Many times, houses that require extensive renovations and repairs are passed over for regular mortgages. The credit score of the borrower wouldn’t matter in this case either. Private lending can help you get the funds you need.
- Private lending usually has a quick approval process. The process of such lending usually only takes a few weeks, whereas regular mortgage approval can take up to 45 days to come through. Private lending doesn’t require perfect credit, so most of the private lenders don’t need as many documents to complete the process as traditional ones do.
Note: It’s good to know about Private mortgages’ short payback period. Many of these loans have a six to twelve-month term. You need to pay the funds back during that term. Private mortgages tend to have higher interest rates than regular mortgages. This is because the lenders are taking more risks since the borrowers don’t need good credit. Often, people will take a higher interest rate on Private Mortgages because the approval process is so quick.
What If You Are Self Employed?
Because the usual way of calculating income is different for self-employed individuals, the regular way of qualification doesn’t work. If you are self-employed, you have the option of getting a Self-Employed Mortgage. It was made especially for those self-employed people who want to buy a house or a commercial property. If you are interested in this loan, you will need to have the following:
- expenses, debt, business finance, and income statements. You will also need an account and bank statements, and anting showing additional revenue.
- See if you have taxes owning by checking your Notice of Assessment, make sure all is paid.
- Bring three years of proof of income as self-employed.
- A credit check is required by some lenders, which most often offer lower or fixed rates.
- Any proof of future work or upcoming work contracts so the lender can see expected future income. This proof could be customer signed sales contracts.
- Your personal banking statements
- Your business license and articles of incorporation if you have them.
How Do You Get a Private Mortgage?
When you decide to go for a Private Mortgage, there are three simple steps.
- You start with the same thing as you would with a regular mortgage. You contact your mortgage broker and set up a meeting. A mortgage broker is more important than many people realize. Brokers are a great help throughout the loan process. He or she can guide you through the steps to help you get through the paperwork and approved it quickly without issue. Any of your questions can be answered right away and the broker can prevent you from making any mistakes during the application. Brokers can also make sure you have all the needed paperwork before you start filling papers out.
- You fill out a mortgage application with your mortgage broker. He or she will help you fill in all the information you will need, and correctly.
- Your broker will tell you about any remaining paperwork that needs to be done. Then you simply wait until you can have access to your Private Loan funds.
With personal lending, you get personalized service with the freedom to choose from different options that suit your lifestyle. Contact your mortgage broker if you have any questions, and remember, there is no need to struggle when you are looking for a loan. If you struggled in the past with getting loans, your luck can change with private lending as a successful alternative to regular banks.