What Is A Private Loan?
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If you’re looking at private funding, you might be wondering what it is, and how it actually works. A private loan refers to funding from a private lender and can be quite a lot easier to get approved for compared to traditional lenders. There are many benefits to private lending, such as quicker approval times and not needing a perfect credit score.
Read on below to find out more about what private lending is, and how it works.
What is a private loan?
A private loan is a line of funding that comes from private lenders, instead of traditional lenders such as banks. Private lending may offer more options in terms of easier approval, quicker processing times and less need for a good credit score. Private lending may be a good option if you are finding the traditional forms of lending criteria too strict, or too hard to meet.
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. You might find it helpful to turn to private lending if you are finding it difficult to receive finance from a bank due to credit issues.
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 lenders check credit scores?
Generally, private lenders require more information about the collateral you may be able to provide, and the details of the loan rather than your credit history. Although they may need to review your finances in order to make a decision, your credit score may not matter to a private lender as much as a more traditional lender.
What are the benefits of using a private lender?
Private lenders can offer several significant advantages:
- Speed – 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.
How are private loans regulated?
It’s a common assumption that banks are a safer option when it comes to getting a loan. However, private lenders in Australia are subject to complying with strict legal and industry codes.
Generally, all lenders and financial brokers must be licensed by the Australian Securities and Investments Commission (ASIC).
ASIC licenses and regulates banks, credit unions and brokers to ensure they do not lend credit that cannot be paid back. ASIC can also take action against lenders who deliberately mislead and are deceptive towards their borrowers.
According to ASIC, credit providers legally must make reasonable inquiries about your financial situation, requirements and objectives before lending, and also take reasonable steps to verify your financial situation.
It is through these strict terms that private lending is thoroughly regulated.
Types of private loans
- Bridging loans – These are short term loans that are taken out to buy a new home before selling an existing property. These are interest-only loans that are then repaid after the sale of the original property.
- Caveat loans – A caveat loan is a short term loan option that allows fast access to funding when secured against additional property owned by the developer. Caveat loans can be the fastest to both apply for and settle. Only a viable option for the short term, caveat loans are generally only for a few months. The private lender decides how you will repay the funds before approving your loan.
- Bad credit loans – Are loans which usually sought out by borrowers who have a bad credit history. This can be caused by a variety of factors, including overdue bills or defaulting on a previous loan payment. By having a poor credit history, lenders are usually loath to lend to you. Lenders may perceive you as a high risk. These loans are usually short term and fixed-rate, allowing the borrower to repair their credit history.
- Second mortgages – These occur when a borrower has already taken out the first mortgage on their existing property, before deciding to take out a second loan against said property. For this type of loan, the first mortgage must be repaid before any money goes toward repaying the second.
Where does Tiger Finance come in?
With Tiger Finance, we can help to get you a loan in four easy steps. 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 been able to help countless people with less than perfect credit ratings gain approval for private finance. It can be difficult to get approved from traditional lenders, which in turn can make achieving your goals hard. Lending should be easier, 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 hard, Tiger Finance can make the entire process simple and pain-free. Call one of our loan specialists today for your free initial consultation today!
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