Private loans are those loans that act as a filler for loans that cannot otherwise be secured in the market. They fill in the void for loan takers who cannot get funded by government or corporate institutions for reasons unknown to all. There may be many circumstances where they are not able to find loans in the market and they have to resort to private loans. Thus, they become beneficial.
Why Are Private Loans Taken?
Private loans are taken when the loan taker cannot find loans from banks, government institutions and corporate houses. They generally need this loan amount for various personal purposes. They are used to combine debts by using the money to pay off another loan. They are sometimes used to purchase new homes, pay medical bills, personal costs, or purchase vehicles. They can be for anything.
As per research, of all the Private loans in Australia, most come from private loans. That accounts for 27% of the total loans taken and that is quite a major chunk of it. Despite the fact that there are several banks and other institutions where loans can be obtained, many people have trouble obtaining them. So naturally, they have to resort to private loans.
Where Do Private Loans Come In Handy?
As you already know by now that private loans fill in the void created by mainstream loans give their loans out in various forms. These are generally given in forms like:
- Bridging loans – They are what they claim to be. Say suppose you purchase a home and you are running short of a few thousand dollars and you need that money to make your full purchase. You can take a private loan to fill up that shortfall in your funding. But this loan you are required to pay within 3-6 months. And you pay a higher interest rate for this kind of loan.
- Caveat loans – This too is a short-term loan which typically acts like a bridge between the purchase and the shortfall. This loan must be paid off as soon as the old property is sold. And the interest rate is usually very high here.
- Bad credit loans – Say you have managed a very bad credit score recently. You have even defaulted on your existing loans, have pending court orders on you, unpaid utility bills, pending traffic penalties, etc. It provides great help This is when you may not be able to secure loans from banks, etc. And a bad credit loan is your last refuge.
- Second mortgages – You may have already guessed it right. You already have mortgaged property and you are still in dire need of funds. So, where do you acquire them from? Of course, your instant solution here is a second mortgage.
The Positive Side of A Private Loan
Life has both positive and negative sides to it. But here we will have a look at the positive side of a private loan. It is highly beneficial when you are unable to find loans from other sources. This loan will bridge the gap between the bank and your needs. It will help you get a loan sooner than you think.
Caveat loans help in property equity. They give you a chance to invest again. And private loans are acquired very quickly, even faster than banks as they disburse the money faster. There are negatives to it but they are far more outweighed by the pros.
Are Private Loans Safe?
And the obvious answer here would be a big yes. Private loans are absolutely a safe option. If you believe that the rules of the land would not protect you when you take out a loan, you can rest assured that this is not the case. Private loan givers are totally bound by the laws of the land. They have to comply with all rules and regulations that govern money lenders, be they private or governmental lenders. You have to go by the industry codes to be able to give out loans.
All lenders are answerable to a government body that rules over them. Here even private loan givers are not exempted.
Reasons Why Private Loans Are Chosen
There are numerous reasons why people tend to choose private loans over other types of loans. The reasons are listed below:
- You do not have to meet up with many expectations like other loans in acquiring it
- You do not have to go through any enquiries before taking a loan like other types of loans which do not lower your credit score
- A single negative cannot deter you from getting a loan
- No one is rejected for loan acquisition here
- You are not charged a high interest rate just because you have defaulted on your previous loan or have a poor credit score
With so many good things and aspects about private loans if you have inhibitions about them, you can immediately get rid of them.
