How to get a personal loan from a private lender

Published May 8, 2020

Melanie is a certified business advisor with over 25 years of experience in real estate investing. Her expertise is highlighted throughout Fit Small Business’s real estate financing, property management, and real estate investing content.

Private money loans are good for both short- and long-term investors in need of quick financing to compete with all-cash buyers. Investors sometimes use a private money loan, also known as a hard money loan, to purchase a property before refinancing to a long-term conventional mortgage. Investors who don’t qualify for conventional mortgages also may seek out private money loans, typically when they’re adding properties to an existing portfolio with over four existing properties.

If you’re looking for a private money lender to finance your next real estate investment, LendingHome offers competitive rates for prime borrowers with no prepayment penalties. You can get funded in as little as 5 days. Prequalifying online takes just a few minutes.

Private Money Lender Rates, Terms & Qualifications

Private money lenders typically loan an amount equal to a percentage of a property’s loan-to-value (LTV) or its after-repair-value (ARV). LTV is based on a property in good condition, and ARV is for a property in poor condition and in need of repairs or rehabilitation.

Private Money Lender Rates, Terms, Fees & Timing

Private money loans are typically interest-only. This means that private money borrowers pay monthly interest throughout the term of the loan and pay the balance at the end of the loan. Some lenders charge prepayment penalties if you pay off the loan before the due date. While the interest rates on a private money loan might be higher when compared to a conventional mortgage, the monthly payments might be lower.

Private Money Lender Terms & Qualifications

A national hard money lender will want a minimum credit score of 550, but the best interest rates go to borrowers with higher FICO scores. Depending on the real estate investment project, some hard money lenders will look at the project’s potential more closely than the borrower’s personal financial statement.

Who Private Money Lenders Are Right For

Private money lenders are predominantly right for short-term fix-and-flippers who want to compete with the short timeline of an all-cash buyer. However, private loan lenders are also right for long-term investors who want to rehab a rental property before refinancing into a permanent mortgage or seasoning a property before refinancing.

Long-term investors who can’t qualify for a conventional mortgage, 203(k) loan, or HomeStyle Renovation mortgage, but plan on refinancing once they meet qualifications also use private money loans.

Where to Find Private Money Loans

You could ask friends and family for a loan to fund your real estate investment project or find accredited investors. However, if you don’t have a track record of completing successful real estate investing projects and a real estate investing network, getting investor capital is tricky. If you structure a solid deal and can show investors their potential return on investment (ROI), you may find one willing to fund your project, but it’s challenging.

If you don’t have friends and family who can invest or can’t get investor funding, you can apply for a loan through an online private money lender such as LendingHome or Patch of Land. You can also shop on a site like LendingTree, which will match you to several hard money lenders that offer loans to meet your needs.

Getting Funded

To get funded with a private money loan, borrowers will need to submit additional documentation and verification, including proof of experience or licensed contractor bids. Once underwriters verify all documentation, the loan gets approved, and it moves to closing where funds are distributed, and the borrower takes possession of the property.

Additional documents lenders may require prior to closing include:

  • Purchase and sales contract
  • List of past projects completed by the investor
  • Licensed contractor bids
  • Scope of rehab work
  • Property appraisals
  • Proof of down payment funds
  • Prepaid fees and costs

Pros and Cons of Private Money Loans

Private money loans are advantageous for investors who want to quickly purchase and fix up a distressed or damaged investment property. The quick preapproval and fast funding time are two of the main advantages. However, there are disadvantages, including higher interest rates and shorter loan terms.

We make getting a private personal loan quick and easy.

How to get a personal loan from a private lenderIt can be uncomfortable knowing that you don’t have the money to cover your expenses. Some people are searching for a personal loan to take care of a financial emergency. Others, though, are in good financial shape but would rather deal with a private lender as opposed to a bank. At American Business Credit, we understand both scenarios, and everything in-between.

The Ins and Outs of Private Personal Loans

It is essential to learn the ins and outs of private personal loans before deciding that this is best for you and your current financial situation.

The word “private” in this case means that you are borrowing money from a private lender, not a bank, credit union, or some other type of financial institution.

A “personal loan” is one that you can do with what you please as it does not have any specified terms. This is in contrast to other types of loans, such as a mortgage, for example, in which the money is meant for purchasing real estate.

Personal loans are used for a variety of reasons ranging from home repairs to paying for college to dealing with unexpected medical expenses. How you use the money is your decision.

Benefits of a Private Personal Loan

  • Shorter application. There is nothing worse than applying for a bank loan. The application process is long and drawn out. On top of this, you have to deal with a loan representative who is not always as helpful as they could be.
  • Your credit does not matter as much as it would with a bank loan. This is why so many people with bad credit turn to private personal loans instead of a more traditional loan from a financial institution.
  • Quick decision process. Did you know that it can take a bank several weeks to make a decision on your loan? Do you have this much time to wait? Even if you do, nobody wants to sit around wondering what is going on. With a private personal loan you will get an answer in a hurry. Even better, you can have the money in your hands soon enough.

In an overall sense, bank loans will always be more popular than private personal loans. However, this does not mean that dealing with a bank is best for you. With many benefits, some of which are detailed above, there are reasons why a private personal loan may be a better choice.

Being a private hard money lender can be exciting and rewarding. Making a large return on your investment can be enticing. In order to become a hard money lender, you will need to do the following:

Access to Money

The first thing that you will need in order to become a hard money lender is money. You will need substantial amounts of money in order to get started in this business. It is best if you have the money yourself. However, you could also create a business relationship with investing partners in order to raise the money that you will need. Regardless of whose money it is, you need to have access to it.

High Risk and High Reward

Besides having money to lend, you need to have the right attitude. You have to have a desire to make a higher-than-average return on your investment. The returns that you can gain from hard money lending are much larger than any traditional form of investment.

As a hard money lender, you will be dealing with distressed properties and distressed borrowers on a daily basis. This means that there is a high risk of default. Therefore, you have to prepare for this possibility and know exactly what you will do if it occurs.

Establish a Business

Once you have determined that you have enough money to get started and the proper appetite for risk, you are ready to begin. The first thing that you need to do is establish a business entity. This can be done with the help of an accountant or lawyer. You will need to set up some type of entity so that you can limit your liability. A corporation or an LLC are two of the most popular choices.

Once you do this, you will also need to get the proper business licenses and certifications for your area. Each state has different rules, so you will have to be certified in the states that you want to do business in. Many hard money lenders stick to one geographic area so that they can limit this problem.

Get the Word Out

Once you are officially in business, you need to get the word out that you are a hard money lender. You can do this in a number of different ways. One of the best ways to do this is to set up a referral system with local lenders. Pay mortgage and loan officers a referral fee for sending you customers. When they do not have a program that fits with a particular client, they can send them to you. In many cases, you will be able to service their needs and make some money along the way. Also, you can advertise online or in local business sections of the paper.

How to get a personal loan from a private lender

If you have a bad credit rating, getting a home loan could prove difficult. There are however some steps you can take to give yourself the best chance of being approved.

1. Apply with a mortgage lender who does not use credit scoring

The majority of lenders use a computer-based system called credit scoring to assess your home loan application, says Kim Wight, a Personal Mortgage Adviser with Smartline.

“This means that the data collected in your application is given a rating or score and if the computer scores you as a bad risk, the application is declined before a real person has a chance to look at the application or hear your story as to why you have had credit problems in the past. In other words, ‘computer says no’,” she explains.

“By applying with a lender who does not use credit scoring, your application – and the reason for your past credit problems – will be assessed by a real person, who can evaluate your personal situation past and present and use this information to make their decision on your application; it can be a case of, ‘human says yes’.”

2. Avoid lenders mortgage insurance (LMI)

When you apply for a home loan, there are two approvals that have to be sought out if you borrow more than 80% of the value of the property. One is from the lender, and the other is from the mortgage insurer, who protects the lender in case you default on the loan.

“By having funds to cover 20% deposit, and other costs such as stamp duty and legal fees, you avoid having your application be assessed by the mortgage insurer, and you have a greater chance of the loan being approved,” Wight says.

3. Demonstrate that you have improved your financial situation

“If you have had problems in the past, you need to show that you are now back on track by ensuring all current financial commitments are being paid on time,” Wight says.

“This includes not only your loans and credit cards but your rent and utilities as well. Evidence of regular savings will also strengthen your application.”

4. Apply to a specialist lender

Depending upon the severity your bad credit history, the mainstream lenders may not be able to assist you – but there are specialist lenders in the market place who price their products based on the element of risk.

“The interest rate is usually higher,” Wight admits,”but people usually only stay in these products long enough for their credit situation to improve, and then they refinance to a lower rate.”

5. Seek professional advice regarding your credit report

“There are a number of specialist credit repair agencies that may be able to assist you with cleaning up your credit report. It is advisable to speak with them or a solicitor to investigate if it is possible for adverse entries on your report to be removed,” Wight says.

6. Shop around – but only in principle

It is important that you don’t apply with lots of lenders as you shop around for a home loan, as each time you make an application, it is recorded against on your credit report.”If lender after lender is declining your application, this will further impact your credit report,” Wight says.

“At the outset, a mortgage broker can assess which lender is most likely to approve your loan application and what interest rate and charges may be applicable. It is important that you tell your broker the complete and honest story of why you have experienced credit problems so they can address the problems with the credit department of the lender.”

What is a private personal loan? It is a financial product offered by private lender. Basically, it is a non-bank funding product. Rates for this type of borrowing can be higher than with traditional banks, but those with lower credit scores may have a better chance getting approved for this type of funding.

  • Should I Use Private Personal Loans or a Bank?
  • Benefits of Traditional Bank Loans
  • Borrowing Money Without a Bank Loan
  • Why Choose a Private Personal Loans Over a Bank
  • Reasons to Take Out a Personal Loan
  • No More Barriers to the Money You Need

Taking out a loan for business or personal expenses is sometimes a necessity. Two of the main sources for these types of loans are banks and private lenders. In this article we compare banks and private lenders and look at some of the pros and cons of each.

How to get a personal loan from a private lender

Benefits of Traditional Bank Loans

There are benefits to taking out a loan from a bank. Traditional banks often have relatively low interest rates, which is why many people use them for loans. At these institutions, loans can be short term or long term.

These interest rates come at a price, though. Traditional lenders like banks and credit unions also have a lengthier approval process and may require collateral before loaning money.

The strict guidelines set up by banks means they deal with lower risk loan clients. At the same time, these strict guidelines and lengthy approval times could mean that you could have to wait weeks for your money.

For those with poor credit, getting a loan can sometimes be difficult at a traditional lender. For example, say you’re planning some home improvements. If you have poor credit and you went to the bank and applied for a loan, you might be turned down or you might be offered less money than you need to make those home improvements.

Borrowing Money Without a Bank Loan

If a traditional bank or credit union won’t lend you money or won’t lend you the full amount that you need, what are your other options? Apart from borrowing money from family or friends, there aren’t really many. Thankfully there are private lenders out there who make small, medium, or even large loans to individuals.

Private lenders tend to lend to those with less-than-stellar credit while banks usually stick to individuals with higher credit scores. They also tend to be a faster option for getting money. Private lenders usually offer smaller, short term loans which are suited to people who have more immediate financial needs.

How to get a personal loan from a private lender

Why Choose a Private Personal Loans Over a Bank

One of the disadvantages of using a private lender is that they often offer loans at higher interest rates than traditional banks. This is the main deterrent for most people. At the same time, there are several reasons why you might choose a private lender over a bank loan.

Since banks tend to lend money to individuals with higher credit scores, some people choose private lenders because they have a low credit score and may not even be considered for a bank loan. So if you are rejected by a bank, taking out a loan from a private lender may your best option for borrowing money.

This isn’t always the case, but sometimes a bank is more critical about what you plan to use the money for than a private lender might be. Private lenders have been known to lend money for commercial uses, such as to cover the cost of a business expenses, as well as consumer uses, such as paying bills or buying a car. Of course, banks have been known to lend money for these purposes, too.

Also, qualifying for these private loans is simple, easy, and straightforward, unlike bank loans which can involve a long, tedious process just to apply. These days many private lenders have online applications that speed up the process even more. In many cases, private lenders often approve your loan within one to two days.

Reasons to Take Out a Personal Loan

There are a number of situations that call for a small, short term loan. If an emergency arises and you need money to cover all your bills and pay for your groceries, a private lender can help. If someone in your family has an accident or becomes ill, a private loan can help you pay the medical bills now. If your car breaks down and needs repairs, but you don’t have the money to repair it right now, taking out a personal loan from a private lender can help you get your car back on the road. Or maybe you’re trying to start your own small business, but are having trouble getting approved for a loan from a traditional lender. These and many other situations may lead you to use a private lender.

No More Barriers to the Money You Need

Although you may be having a hard time getting a loan because of your credit score, poor credit need not be a barrier to taking out a loan. If you have tried to get a bank loan, but have been turned down, a private lender may be a good option for getting money to cover the things that you need. We can help you get started.

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Every year, millions of Americans turn to private sellers to buy their next car. Unlike most auto dealers, however, private sellers rarely offer financing. Private party auto loans can fill that gap.

When buying a car directly from an owner rather than an auto dealer, your financing options can be limited. If you don’t want to pay entirely in cash, you might be able to get an unsecured personal loan – or you could consider a private party auto loan, which often has lower interest rates. As a result, a private party auto loan can be less expensive than a personal loan because the car serves as collateral. Here’s what you’ll want to know about private party car loans before you get started:

Private party auto loan: What it is and how it works

With a private party auto loan, a lender loans you money to buy a car from a private seller. You must select the car you want to buy before applying for financing. If approved, the lender typically pays the seller or lienholder the amount you owe, then you repay the lender, with interest, over the term of the loan.

1. Find out if you are eligible

Lenders often have certain requirements for both the borrowers and the cars that will secure the loan. The criteria may include minimums for your credit score, income and upfront payment. The lender may also set a limit on the age and mileage of the car or require a floor on the price. Usually, you can go online, call lenders or even walk into a financial center to get information about eligibility. Locate a Bank of America financial center near you

2. Compare payoff periods and costs

Your interest rate on a private party auto loan will depend on a number of factors, including the length of the loan (often 48-72 months), your credit history and the car’s age and mileage. Pick the loan term that best fits your budget. Longer terms may have smaller monthly payments, but remember: The longer the term, the more interest you’ll end up paying over the life of the loan. Some lenders, including Bank of America, may let you prepay without penalties, which can save you money on interest.

You can use the Bank of America auto loan calculator to estimate what your monthly payments might be based on the loan amount, term and annual percentage rate (APR).

3. Apply for – and close – your loan

When you’ve found the car you want and you’re ready to apply for a loan, come prepared with the information and documentation you may be asked to provide:

  • Your full name, date of birth, address and Social Security number
  • Employment and income details
  • A copy of the vehicle registration
  • A copy of the front and back of the vehicle title
  • A bill of sale with details about the agreed-upon purchase
  • A written 10-day payoff quote from the seller’s lender (if the vehicle currently has a lien)

If you’re approved, you’ll get the final details on the loan and you’ll be ready to close. The lender will make out checks to the seller and/or lienholder and you can hand them over. You’ll still need to transfer the title and registration into your name and place your lender as lienholder on the title; you may want to check with your local Department of Motor Vehicles (DMV) for the details.

A private party auto loan can give you the flexibility to buy the car you want directly from an owner in a way that best fits your budget.

It’s easy and fast today to get approval from private lenders for personal loan. In many cases now, you just need a fast Internet connection to complete the process from application to approval. Richard asks this:

“I’m a bit short of cash this week and I’m thinking of getting a payday loan. But I’m embarrassed to drop by a lending store. I thought to go for private lenders for personal loan instead. Is the process wholly online? How do I get the cash? Thanks in advance for the advice.” – Richard, San Francisco, CA

Well, Richard, you’ll be glad to know that many private lenders for personal loan here or in the UK and Canada allow you to complete the whole process from application to bank transfer without you needing to leave your seat. Even if you have a bad credit, you can avail yourself of this option.

Let’s take a look how to get approval from private lenders for personal loan.

Search for lender

Use keywords such as “online loans,” “online payday loans,” or “private lenders for personal loan.” You’ll get tons of results showing these lenders with pitches that range from getting fast cash advances to quick processing. Scour through the results and shortlist the lenders that offer 100% online processing. Read their terms and offers and decide which one best fits your situation.

Fill up online form

The application process is quick, without lengthy paperwork. Usually there’s a button that says “Apply Now.” Click this to get the online form. Fill it up. Private lenders for personal loan often require the following data:

  • Personal data
  • Work information
  • Bank information

If you have a bad credit, don’t worry, many lenders do not require the following:

  • Past bank statements
  • Credit checks
  • Tax forms

Make sure all data are correct. Even a minor error like misspelling your middle name can delay the process, or you may be asked to submit another application.

Requirements

Private lenders for personal loan will ask for a proof of recurring income to show your ability to pay back. This can be your paycheck stub or utility bill in your name. Depending on the lender, some will ask you to scan the document or screen grab your online account bill (if this is available) and send it as an attachment in an email. You will also be required to provide either a savings or checking account. Other requirements on how to get an online loan include the following:

  • Borrower is at least 18 years old
  • Gross income average of $1,000
  • No bankruptcy case
  • Must be resident of state where you’ve applied

Get loan fast

Many private lenders for personal loan now offer same-day bank transfers. You can get the cash fast and easy! As long as you meet the requirements and your application contains no errors, direct lenders can process the loan in a day. On the other hand, some direct lenders allow for 2-3 days for an approval to get through.

Advice to borrowers

Online loans such as payday loans and cash advances can trap borrowers in a debt spiral. The nonprofit National Consumer Law Center warns that many lenders encourage borrowers to refinance a loan with another one loan. Avoid this practice if possible. Pay the loan fast to avoid being charged with exorbitant rates and penalties.

How to obtain quick money in emergency situations

An emergency can strike any time in one’s life. You may need to rustle up cash quickly to tackle it. In such situations, try to use these effective tips to obtain cash fast to tide over the problem.

CONCLUSION

Today, you have a whole array of private lenders for personal loan offering online processing for your convenience. The process is easy and fast that you won’t need to leave your seat to get the cash. Just make sure to pick the lender with the best terms for you and one that practices ethical lending.

Get access to the funds you need.

We offer loans up to $20,000.

What is a personal loan? See note 1

A personal loan can provide the money you need to help cover unexpected expenses and more. It’s often a good alternative to using a higher interest credit card. We offer flexible terms and no application or early repayment fees.

Make managing your bills easier when you pay off higher interest loans and credit cards.

Repairing damage to your home can get expensive. Get money for upgrades or repairs quickly.

Don’t let emergency bills stack up. Our personal loans can help you pay for these expenses.

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Get an estimate of your APR and monthly payment.

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Use our easy personal loan application — minus the fees.

Apply Online

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Get Your Money

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Personal Loan FAQ

You can use a personal loan for many purposes, from paying off bills to building a pool in your backyard. This type of loan is flexible to meet your needs and get you money quickly.

No. We don’t offer loans to cover higher education expenses. For more help with finding student loans, speak with your school’s financial aid office.

Secured loans require collateral, which means they typically offer lower interest rates. If you’re unable to repay a secured loan, your collateral may be used to pay off the loan.

Unsecured personal loans don’t require any collateral and, as a result, can have higher interest rates.

No. But our personal loans can give you an alternative to help you manage debt. You can take a personal loan to pay off various bills and possibly save on interest charges.

Looking for flexible options on a personal loan?

We can help you get the money you need.

Personal Loan Rates

Displayed rates are our lowest annual percentage rates (APR) and are effective today and include a discount for automatic payments. Rates subject to change without notice. To qualify for the lowest rates or terms greater than 60 months, you must have excellent credit.

Rates vary based on approved credit and other factors.

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How to get a personal loan from a private lender

Note 1 Rates subject to change without notice, but will not exceed an 18% Annual Percentage Rate (APR), and vary based on approved credit and other factors, such as term and loan amount. Monthly payments vary based on APR for which borrower is approved and amount borrowed. Loan repayment terms range from 12 months to 84 months. Financing for 12 to 36-month terms requires financed amount of $2,500 or greater. Financing for 48-month terms requires financed amount of $5,000 or greater. Financing for 60-month terms requires financed amount of $10,000 or greater. Financing for 72-month terms requires financed amount of $15,000 or greater. Financing for 84-month terms requires financed amount of $20,000. Applications for loan terms longer than 60 months must meet higher credit and risk standards than applications for loan terms up to 60 months. Maximum loan amount for all terms $20,000.

Personal Loan Payment Example: A 36-month new personal loan with a 11.99% fixed APR would have monthly payments of $33.21 per one thousand dollars borrowed.

Use of the term “member” or “membership” refers to membership in USAA Membership Services and does not convey any legal or ownership rights in USAA. Restrictions apply and are subject to change.

Bank products provided by USAA Federal Savings Bank, Member FDIC.