Borrowers often seek private lenders if they have very little cash equity because it is tied up in other investments that they do not want to distract from. Other times the borrower is someone well to do who has suffered a big loss and gone through bankruptcy. A private lender may deem the borrower worthy of a loan when the banking world would not take on the risk.

Private lenders tend to be very blunt about what they will and not offer to a borrower. Just as with large lending institutions, private lenders have their own standards and measures of risk for determining what they will offer you. To make sure you have an honest competitive rate we recommend asking for a list of references so you can do your own research on an appealing privately offered loan.

Typically, private lenders have higher rates associated with their loans. However, private lenders are generally the last stop on the line in an effort to obtain a loan. If you have been turned down my institutional lending organizations, the rates of a private lender probably match the perceived risk of a lender offering you loan. Private loans are priced competitively based upon how “hard” the loan is to finance given the associated risk based upon passed history of the borrower.

Private lenders got their start filling a niche in the lending market for loans that did not meet the strict criteria of conventional lending. Private lenders provide what is commonly referred to as a “hard money loan.” These loans are typically more difficult due to one or more of the following circumstances:

• Fast closing (the borrower needs the money almost immediately)
• Non credit borrowers
• Non conventional (large loans)