If you have damaged, bad, slow, or no credit, chances are that you will be faced with challenges if you desire to borrow money. Most banks, credit unions, and other lending institutions rarely loan money in the form of personal loans to those who have less than excellent credit scores - usually no one who scores under 700 on the FICO scale. Oftentimes, borrowers can have more luck receiving financing if they go through a private lender to get the loans they need - regardless of credit histories and past credit problems. Private lenders tend to put more faith in bad credit borrowers than they would be given in a traditional lender setting.
Private Lenders Invest In You
Private lenders can be individuals, corporations, or other entitites or agencies who want to invest their money and other capital by loaning out money to individuals, businesses, and other corporations. These private lenders have the ability to finance either an unsecured personal loans or secured personal loan. As with any lender, there are differences between the two types - mainly the amount of money that you will be paying back in the form of interest.
Two Types Of Personal Loans
The difference in interest is related to the risk that your private lender will assume when loaning you money. The secured version of the personal loan from a private lender is by far the cheapest alternative. To secure your loan, you will place an item of value, such as your home or automobile, up for collateral. This means that if you fail to repay your private lender for the amount of money loaned to you in your private lender personal loan, the lender can foreclose upon your home or reposess your vehicle to be reimbursed for what you owe them.
Although the secured personal loan from a private lender is your cheapest option, it is also the most risky for you as a borrower - because your home or automobile can be on the line if you are unable to repay the lender. On the other hand, the unsecured version of the personal loan from a private lender is not secured by any type of collateral, and thus poses the greatest risk to the private lender, who is counting on your personal integrity (which is hard to prove when you have bad credit) to ensure repayment.
This means that the lender will make up for that risk by charging more interest than if you had pledged collateral. This makes the unsecured version of the personal loan with a lender the most expensive of the two in terms of interest that you will pay, as well as making your monthly payments larger and giving you less time to repay the private lender.
Internet Great Source To Find Private Lenders
Your best source when looking for private lenders is the Internet. There are lots of options for borrowers with all credit types, and some websites that are totally dedicated to connected potential borrowers with private lenders who are looking to make loans.