Private Lenders for Personal Loans

Have you ever tried to get a personal loan and faced a barrier due to bad credit? In Canada, bad credit has made many people believe that they have run out of financing options when they need money. However, there are options you can explore. One of these options is a personal loan from a private lender. This is an option that many do not consider, basically because they are not aware of it. Here is some information to help you should you choose to explore this option.

There are formal financial institutions like banks or credit unions which provide loans to their customers. A private lender is someone who is not in a financial institution, but rather could be a person or a company that loans out money. They provide private loans based on an underlying relationship that helps form the basis of trust. 

Financial institutions will avoid giving loans to people with bad credit as they deem them to be too high risk. Private lenders on the other hand, offer a solution to this issue rather than dismissing a potential borrower. They use a different set of criteria to give a loan, opening up financial freedom to many more people

 

Private lenders for personal loans in Canada fall into two categories. These are those who will ask for security, and those who will provide a loan that is unsecured. When security is required, it can be a deed of trust that is used. Other forms of collateral are also accepted, including title deeds, auto log books and so on. When the loan is unsecured, the private lender will need to know the person they are giving the loan to. This will help them follow up with the payments should it deem necessary to do so. In some cases, these lenders will also get the borrower to provide a guarantor for the loan, to help minimize the risk of giving it out.

The Private Personal Loan and the Payday Loan

Two loans that are often mixed up and misunderstood are the payday loan and the private personal loan. Many people will seek a payday loan when they are in a tight spot, or when they have bad credit. The payday loans are given based on their salaries as security, and they are short term in nature. They have higher interest rates than the private personal loans. Since they are based on the earnings of the person borrowing them, there is also a clear limit as to how much can actually be loaned out. Furthermore, you will find that with a payday loan, you can easily source the funds from a financial institution.

With a private personal loan, you can extend the payment period and pay in smaller installments, it all comes down to what you agree with the lender. Furthermore, you will also find that the interest rate is much lower. This flexibility makes this type of loan much more attractive to the borrower. Private lenders for personal loans Ontario is an excellent alternative Ontario residents.

Advantages of Seeking Private Lenders for Personal Loans

Private lenders for personal loans in Ontario are becoming more popular with time. This comes down to the advantages that one can obtain by taking out a private loan, in comparison to one from an institution. Some of the compelling reasons for these loans include: –

• Taking this type of loan protects you from increasing your credit card debt. This in turn helps you maintain your credit score while enabling you to get hold of funds as and when you need them. For a person with bad credit, a private loan gives them time and means to get back on proper financial footing so that they are able to get loans from institutions in the future.
• The interest rates that private lenders for personal loans offer are typically lower than those from financial institutions. There is no fixed interest rate given as it depends on who the lender is. However, the collective idea behind private loans is facilitating access to cash for a minimal return, rather than a high focus on providing protection from risk.
• It is not necessary to tell the private lender the reason that you need the personal loan. When you seek a loan from a financial institution, it is essential to explain what you intend to use the money on. This will determine the terms. For example, the interest rates that one has to pay may vary when they are taking a mortgage loan in comparison to an auto loan.
• There is less red tape when you are seeking a loan from a private lender. With public institutions, you may need to apply to different departments and also wait for some time as your loan is being processed. With private loans, you can get access to the loan much faster and close the deal with ease.

Disadvantages of Seeking Private Lenders for Personal Loans

There are a host of benefits that one can experience when they get finances from private lenders. However, one must take note of the dark side of this option so that they can make an informed decision. Some of the disadvantages include: –

• Loan sharks fall into the category of private lenders, and they often take advantage of the vulnerability of those seeking personal loans. They do this by offering repayment terms which many cannot afford over time, leading the loan to spiral out of control.
• It is easier to sort out any issues that arise when one is dealing with a financial institution. With a private lender, there may be many gray areas.

Personal loans from private lenders are typically short-term in nature and an excellent solution when you need a quick loan at minimal notice. If you have some collateral to offer, the processing of the loan can be done faster. A private lender for personal loans is ideal when you have been turned down by financial institutions. You can get back on good financial footing if you consider this option.