Respectability of private money-lenders
Private loans as an alternative to bank credits
If you need money through a credit, you will face a number of problems. It could all be so easy: asking for a credit, quick check for credit-worthiness and finally receiving the money from the bank. Sometimes, however, it is far from easy. It is possible that the bank denies the credit if a bank account or another credit was cancelled by the bank, leaving the applicant with a problem. He still needs money but does not get it from his bank. Private money-lenders are an alternative, but one has to have a close look whether they have a good reputation.
There are many black sheep and at the end of the day, anybody who lends money wants to get it back, usually with a considerable interest rate. There are some aspects somebody looking for a credit should consider to find a respectable money-lender. First, serious lenders would not offer an amount of money that is impossible to repay. Sometimes the credit-worthiness is checked through a salary statement or a look at the work contract to see whether it is limited, meaning that the customer will have less money available in the future. Private money-lenders are taking a considerable risk. Overall, private lenders follow the same rules as financial institutions. It is important to sign a valid contract, containing details about both parties, such as name and address. The amount of money has to be part of the contract as well as payment modes and interest rates. All questions should be addressed in the contract so that everything can be legally settled. Cancellation conditions that are not part of the contract may lead to the debtor being able to cancel the contract with a disadvantage to the creditor. When signing the contract, one should make sure that there is no chance of aggrievances. Interest rates for private loans are usually higher than for bank loans, yet one should make sure that the interest rate is not too high compared to commercial interest rates. As the risk for private lenders is higher, it is reasonable to charge slightly higher interest rates though. In many cases, the money-lender has to count on his client, increasing the risk considerably. That is the main reason why these credits are often handed out by relatives as the personal relationship makes the chances of fraud less likely. Sometimes, private lenders want to secure their credit. If this is part of the contract, one has to make sure that there are no legal issues that may be a possible disadvantage.
A good way to distinguish respectable from other lenders are their advertisements. Some of them offer perfect conditions without any collateral. These advertisements usually have a catch though, but one would not notice before actually starting to repay the credit. Before applying for a private loan, one should check whether it is possible to get a regular bank loan as dubious contracts are very rare compared to private lenders.