A licensed money lender is an individual or institution that avails short-term loans to other individuals or organisations. During such transactions, formalities that are common in mainstream financial institutions such as banks do not come into play. Private lending has gained prominence since it avails you with quick cash in your time of need even if you do not meet the threshold that is imposed by banks.
Owing to the minimal formalities that a legal money lender imposes on his or her clients, more risks are associated with private money lending compared to bank loans. It has been noted that fraudulent money lenders have infiltrated the industry. Such individuals or companies may take advantage of you. There are several factors that you should consider when choosing licensed money lenders. These include:
This is an essential element, which needs to be put into consideration. To avoid incurring hidden charges and other costs, choose a lender who is credible. To establish the credibility of a money lender, conduct a thorough background check so that you found out the experiences of his/her past clients. Lenders who have in business for long are likely to be more reputable. Choosing them over newbies is therefore advisable.
You should be careful when signing the loan papers. Read through the entire loan contract meticulously so that no disputes arise later on. More often than not, borrowers prefer this line of credit because they do not want to undergo lengthily application processes that involve too much paperwork and bureaucracy. Ensure that the licensed lender that you choose has a quick application and approval process, which ensures that you get the money as soon as it is needed.
If you are looking for a loan from private lenders, you should choose those whose interest rates are favourable. The interest rate on loans offered by legal money lenders is higher than commercial banks. However, no one wants to carry the burden of servicing a loan where the interest rate is too high. Therefore, you should compare the rates charged by different lenders before settling on a particular money lender. It is equally important to consider whether the lenders that you want to choose have flexible repayment conditions. Ensure that the lender selected offers a flexible payment plan that suits your income.
Although private money lending doesn’t require a lot of paperwork, a few documents are still necessary. These include loan documents, which ascertain that the loan was given out. It is the duty of the lender to ensure that the papers provided by borrowers such as land titles are authentic. Borrowers must also make sure that they have copies of all loan documents. The lender that you choose must also respond to your loan request promptly so that you embark on the project that you wish to undertake, or consider other financing options if your application is rejected.