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Over 24 million Americans take out personal loans each year.
For good reason, too–private money lenders give everyone an option to get cash fast.
There are scores of lenders out there waiting to help you get out of a financial pinch. However, some of these may not be legitimate.
It’s always wise to be mindful when browsing lending options to ensure you aren’t walking into a scam. This can also ensure the best rates.
Keep reading to learn more about choosing private money lenders!
1. Identify Your Financial Needs
It can be difficult to assess private money lenders if you don’t quite know what your financial needs are.
Yes, you may be in need of fast cash.
But how much do you actually need, and how soon?
When identifying your financial need, be sure to crunch some serious numbers. Identify your current income sources and anticipated income for the coming weeks and months.
The same goes for any and all debt, including credit card payments and medical bills.
Pinpoint a very specific number for how much you actually require, and make sure you also identify the reason for this need. This may prove necessary when applying to select lenders.
2. Assess Your Repayment Ability
All personal loans must eventually be paid back. What is your repayment ability?
Make sure you know this before applying! Simply assuming that “you’ll pay it back later” is not sufficient.
It’s vital to ensure you won’t plunge yourself into further debt by taking out a private loan.
Most personal loans require beginning repayment within thirty days of receiving funds. Some may require sooner repayment.
Assessing your anticipated income, what type and frequency of repayments will be feasible for you? Make sure you have this information on hand when browsing lenders.
3. Know All of Your Options
There are endless options when it comes to personal financing. You can take out a payday loan, for example, designed to help ease the transition between paychecks.
These usually have relatively steep APRs (interest rates) and repayment terms, but they often require no credit check.
Other loans may be secured or unsecured, depending on whether or not you will be identifying collateral. Some may require a certain credit score in order to qualify for better rates.
What’s more, you can take out a loan via an online or in-person lender. Online lenders tend to have fewer stipulations than institutions like credit unions or brick-and-mortar banks.
However, you may prefer to borrow from a lender you can visit in-person whenever you have repayment questions.
Know all of your options ahead of time, and narrow your list of viable lenders down according to what suits your specific situation.
4. Ask for Referrals
If you don’t know where to begin, ask for referrals!
Chances are, someone in your circle has taken out a private loan before. They may be able to point you in the direction of a reputable lender, either online or offline.
Check in with family members and friends to ask for referrals. You will also find great value in visiting review platforms to learn more about the lenders you keep coming across.
Consumer Reports can be very helpful in this regard.
5. Check Experience and Credibility
As you start assessing private money lenders, pay attention to their experience and credibility in the industry.
Experience is vital. A lender may seem reputable, but if they’ve only been lending dollars for a year or two, they pale in comparison to lenders established for decades.
Some lenders may not specify how long they have been lending on their websites. For this reason, be sure to call and ask.
What makes a lender credible? Credible lenders will have customer support teams at the ready to assist you with your loan.
They will also likely have extensive positive reviews or client testimonials. These lenders will also not be listed on a published lender scam list or offer suspicious lending terms.
6. Identify All Terms in Advance
Another way to ensure credibility is to identify all terms of your loan in advance. Don’t sign on any dotted line until you fully know your rate, repayment terms, and rights.
If you don’t have access to this information in your dealings with a lender, be suspicious.
Clarify the terms of your loan with a customer service representative ahead of time.
7. Compare Quotes
We strongly recommend gathering different quotes from various lenders. This can help you make an informed decision when choosing a private money lender or hard money lender.
Remember that a low APR does not guarantee the best option. You may have tougher repayment terms, for example.
Some lenders may also attach fees to your loan terms, such as early repayment fees or enrollment costs. Make sure to identify these ahead of time to avoid paying a bill you weren’t anticipating.
Always keep your repayment ability at the fore when comparing quotes. Don’t agree to any financing terms that you don’t feel you can meet!
8. Assess Other Options
If you aren’t satisfied with the quotes you’ve received, there are other options.
Some credit unions, for example, may offer better, reliable rates for individuals in need of fast cash.
You may also be able to borrow money from a relative or friend.
Lastly, your credit score can inform the rates and terms you’ve been offered. Request a copy of your credit report–it’s free!–to get fresh insight into your score.
This can also point you in the direction of raising your score to qualify for better rates.
Choosing Private Money Lenders
It is definitely possible to choose a reputable private money lender. Make sure you establish your financial need ahead of time.
Be honest with yourself about how you’ll be able to meet repayment terms. Always ask for referrals and prioritize lenders with experience in the field.
At the end of the day, make sure you don’t commit to any borrowing agreement without being fully aware of its terms.
Now you know all about how to choose between different private money lenders. Are you still wondering whether or not you should take out a hard money loan?
Visit this post here to learn more!