The organization or the individual is known as a private money lender

The organization or the individual is known as a private money lender

Private money loans or simply private money is a term used to describe a loan that is given to an individual or company by a private organization or even a wealthy individual.

Private money is usually offered to borrowers without the traditional qualification guidelines required by a bank Top Banks in the USA According to the US Federal Deposit Insurance Corporation, there were 6,799 FDIC-insured commercial banks in the USA as of . or lending institution. The major issue is that private money loans can sometimes be very risky, both for the borrower and for the lender. With less regulation, the borrower enjoys more freedom to use the loan for less than ideal purposes.

Most private money loans follow the current prevailing interest rates Interest Rate An interest rate refers to the amount charged by a lender to a borrower for any form of debt given, generally expressed as a percentage of the principal. . However, they may be significantly more expensive. When the lender knows what the loan will be used for, it may charge a higher rate of interest if the risk level of the proposed enterprise is high.

Summary

  • Private money loans are given to individuals or companies by a private organization or individual instead of a bank or other financial institution.
  • Private money lenders must be diligent and discerning when offering private money to borrowers.
  • Risks exist for both borrowers and lenders with private money loans.

Private Money Lenders

The mitigation of risk is paramount for a private lender because the goal is to make money. There are a number of factors that a private lender focuses on before offering a borrower a loan. Among the most important are: