Having bad credit can have outstanding and equally horrifying consequences. One of the most common ones is not being able to get bank loans. Luckily, bad credit loans are available for people who have been affected by this disability.
As you may know, if you read our blog posts frequently, there are many sources of bad credit loans at the ready. A less-known one is private money, a concept that many people are not familiar with.
However, it is extremely simple to understand. Let’s take a look at it and break it down in terms of pros and cons, so you know what to expect.
What Is Private Money?
“Private money” refers to funding/bad credit loans from private organisations or individuals for people or companies that cannot get traditional loans. Simply put, if you have low credit score, you cannot get a loan from the bank.
In this case, you must seek a private lender or a private organisation that is willing to lend you some money. As these are numerous nowadays, you don’t need to spend too much time looking for them.
The Pros
- Bad credit loans, in any shape or form they might come in, generally have one very tempting perk: that of providing quick funding, but only smaller sums of money. For larger ones, bad credit loans are not a good idea.
- Another perk – and an obvious one, we daresay – is the minimal checking of one’s credit record. In some cases, the lender will want to analyse it more carefully, but you can allow or disallow that.
- Private money is multi-purpose. Once you’ve been approved, you’re free to do whatever you want with the money. As long as you can pay the loan back, no lender will ever care what it is you’re doing with it.
- The process itself is very simple. You won’t need to go through un-ending stages or provide tons of documents. You fill out an application, wait to hear from the lender, ask for the loan and that’s about it. Disapproval is very uncommon.
- Private money comes from various sources: investors, hard money lenders, friends, business partners.
The Cons
- In general, bad credit loans come with high interest Private money, however, is not an option for many people because their interest rates are even higher. Why? Because this is how private lenders and organisations make money. They live off the interest.
- These interest rates can change if the lender wants them to.
- The sums of money lent through private money are considerably smaller than the ones you’d get from a bank loan. This is because: 1) bad credit loans have this characteristic and 2) private lenders do not have the same pool of money as banks do.
- The terms are usually shorter. In other circumstances, this could be an advantage, but in the case of bad credit loans, the inability of meeting the deadline could get you into a spiral of debt.
Where Should I Look for Private Money?
As stated above, private money can come from everyone in your circle, be it business partners, family, private investors and other companies that are known for investing. You should turn to your family first.
No other lender will agree to tailor a repayment plan for you. Moreover, your family is less likely to offer you money that comes at a high cost due to the huge interest rates you generally find on the market.
What Are the Best Uses of Private Money?
It is commonly agreed that this type of bad credit loan is good for short-term funding and refinancing. But then again, you can use it for a variety of business purposes like purchasing equipment or freeing some much-needed cash flow.
Be careful, though. You might not want to spend the entire loan on something you don’t actually need. Remember that it’s you that’s paying back the loan. If you do spend it recklessly, you might not be able to pay it back on time.
Don’t make this rookie mistake, especially when you’re a business owner.
Private money is a source of financing that is a lot better than the common bad credit loan you can get from companies on the Internet. It does not come with as many strings attached as the latter does.
And believe us, when you need a bad credit loan, you’re in no position of accepting that many strings. You must look for an alternative that is good for you, not the lender.
For more info on private money, enquire with us by filling out the form here. More information on bad credit loans can be found all throughout the site.
