Do Private Loans Have Higher Interest Rates?
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If you are looking into applying for a private loan, you might be wondering if you’ll be faced with a higher interest rate compared to those of a traditional loan. Interest rates may vary depending on your credit score, any debts you currently have, your income, and the size of the loan. This is the case in most loans, not just private loans and lenders. Private loans do not necessarily have a higher interest rate compared to their traditional counterparts.
If you’re looking to learn more about interest rates and private loans, read on below.
What is private funding?
Private funding refers to the funding given to either a company or an individual that have access to private funds. This way differs from traditional bank lending in that there are often non-traditional qualifying guidelines. Individuals may turn to private lending when they are finding it difficult to receive finance from a bank due to bad credit history, or even just simply being a property investor that has leverage.
Private lenders can be either an organisation or a private individual. Unlike traditional funding sources, like banks, private lenders don’t have traditional qualifying systems, meaning that getting access to a loan is much easier.
Do private loans have higher interest rates?
The interest rates that come from private loans are not necessarily higher than those of a traditional loan. Since an interest rate can vary depending on your lender, you may find that some private lenders offer a lower rate compared to a traditional lender. Interest rates can vary depending on many factors, not just whether or not you choose a private lender or not.
Main factors that determine interest rates
If you’re thinking about applying for a private loan, you might be wondering if the interest rate will be higher compared to those of a bank, or a traditional lender. The actual interest rate you will be charged may depend on multiple factors, such as your credit score, income and any debts. The amount of the loan may also impact the amount of interest you will pay.
What can you use a private loan for?
Private loans can be used for many things, such as buying or building a house, purchasing a business, refinancing or urgent funding. Short and long term financing are also viable options when it comes to private loans.
Benefits of a private loan
- Quicker settlement – If you happen to require a loan quickly, the approval process for private lending is faster, and usually involves less paperwork than those of a bank.
- Specialised loans – Private lenders are often able to cater to those after a wide range of loans while having far less strict rules than traditional funding. This may be ideal for those seeking short term finance.
- Credit history – Having a good credit history may not be necessary to gain approval from a private lender. Many people seeking finance are rejected by banks for having less than ideal credit history.
- Easy approval: Non-bank lenders specialise in offering loans to borrowers in individual circumstances. If you do have a bad credit history, or if you cannot prove your income via the traditional methods that are needed by banks, private members may be able to offer you an easy solution.
- Fewer requirements – Banks will generally want excellent credit, a good repayment history, income requirements, and proof of income when approving your loan. Private lenders often have fewer requirements, making the whole process much easier.
- Flexible payment terms – Private lenders may be able to offer you a more flexible rate compared to a bank.
Where does Tiger Finance come in?
Tiger Finance makes getting a loan simple. You will have a free consultation with one of our specialists, and we will tailor-make you a loan. We will negotiate with lenders on your behalf before you are approved.
We have helped countless Australians get approved for private funding. We understand that lending criteria from other lenders are too strict, and can stop you from achieving your goals. That is wrong, and it should not hold you back.
How we can help
Our finance specialists can help you find the right loan for your project. If you are one of the many Australians finding getting a loan difficult, Tiger Finance can make the process simple and pain-free. Call our loan specialists for your free initial consultation today!
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