Pros and Cons of Private Bad Credit Lenders


One of the least understood sources of loans are private lenders. Many people who have problems getting standard loans to start a new business venture or for personal use due to black marks in their credit file may not know that private lenders exist. This is an excellent source of personal loans.

A private lender may be a group of people or one individual with excess funds available. Private lenders are often professionals such as lawyers, accountants or physicians.

They may also be Wall Street investors looking for opportunities to invest their money for a good return by financing new business startups or providing personal loans.

Interesting Project = Approved Loan

Private lenders loan on projects that interest them. They do not follow the bank and financial institution blueprint of qualifying but are free to pick and chose where they invest their money. Credit of the borrower is not their priority.

Instead, they are more likely to consider the experience of the new business owner or the background and previous financial strength of an individual asking for a loan.

Lending is not the main income for these bad credit private lenders but is intended as an additional source of income.

Banking and lending laws do not apply to these individuals as they are not operating a bank or investment house. They are only looking for good places to put their money temporarily and earn a return on it.

Able to Risk Money

Private lenders are often wealthy through inheritance or high paying employment. They can afford to risk money as losing it would not cause serious damage to them financially.

It is important to mention here that a reputable private lender will never ask for money from you upfront.

If a lender mentions an application fee or other fees you must pay, you are not working with an honest private lender. These lenders are investors and not interested in milking you for fees.

What Kind of Loan Might You Obtain?

Depending on his personal interests, a private lender may provide funds for an ecommerce startup website, a new invention or make a loan to a small business planning to expand to a new location. Some of the more common purposes of private loans are:

  • Medical care
  • Buying a business
  • Debt consolidation
  • Vacation
  • Furniture or Appliances
  • Beginning or expanding an online business
  • Education
  • Purchase of real estate
  • Auto Loans

How to Locate a Private Lender?

You may wonder how you locate private lenders who are willing to provide loans to people with bad credit.

You may have seen advertisements in your local newspaper of “money available” and not realized those ads are placed by individuals with money to lend.

They also frequently advertise in trade journals to attract people who have interests similar to their own.

Your public library may have business publications listing private lenders for various types of loans or businesses. Several internet websites are devoted to matching private lenders with people who are looking for loans.

On these sites the individual places a request for a loan and explains the circumstances. Private lenders may contact those who have placed an ad that interests them or may advertise themselves listing the type of loans they are interested in granting.

Find a Lender That Suits Your Needs

To secure a private loan you must locate a lender who is willing to make the loan you need at terms you can afford. They will give you the parameters of their loan offer and you can ask for more details if needed.

Once you find a lender that seems to be a good fit for your needs, you will fill out the paperwork he provides following his own guidelines.

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Lenders Own Their Guidelines

You should understand that private lenders set their own loan guidelines.

They are making loans to people who cannot qualify for a standard bank loan or who are in serious financial difficulty.

Their risk is high and the interest rates charges reflect that risk. Private lenders are the lender of last resort for many people and the terms of the loan they offer are seldom negotiable.