A private money lender, as the name suggests, is a person (non-institutional) who avails money mainly on a short-term basis to an individual without the major formalities required by institutions such as banks when lending money. When you want a loan on a short term basis without much documentation then this is the best option. Private money lending is famous for the convenience it avails to persons who require financial funding but may fail to meet the threshold of banking institutions. Bearing in mind the minimal formalities, it brings about risk in dealing with such transactions as you also don’t want a fraudulent money lender to take advantage of you. There are therefore various factors that one should put in mind when considering who to choose as a private money lender. These include:

1. Credibility and Experience

This is an important factor one should put in consideration when choosing a private money lender to approach. You want someone who is credible and who will not dupe you in the whole process. How then do you establish whether a lender is credible or not? A background check in such an instance would suffice. This will establish finding out the experiences of previous clients who have chosen that lender. Further, you will also need to choose a money lender who is experienced in the sector. Experience is established by the duration the individual has been availing loans and the reputation they have maintained in that sector. You want a lender who has been there for a long time.

2. Application and Approval

Another factor that’s of importance to you is when the approval of the loan is made in terms of the time limit and also the application process. As a person opting for private money lending, you’re likely interested in a lending procedure that doesn’t involve a lot of paperwork at the application stage. You also don’t want a long application process. Further, the approval needs to be prompt. You will, therefore, be looking for a money lender who will ensure prompt and fast application process and approval.

3. Interest Rates

As a person looking for a loan, you may also be looking for a person who will lend you the money at a favorable interest rate. You don’t want to make a loss by servicing a loan which envisages a high-interest rate as compared to the service the money gave you. This calls for you to compare and contrast lenders when making the decision on who to choose to provide you with the loan.

4. Flexibility in Payments

This is also an important factor to consider when choosing on who to choose as a private money lender. You want a lender who will avail you a suitable payment plan, bearing in mind that most private money lending is majorly on a short-term basis. This will be determined by the payment plan that you consider most suitable for your needs.

5. Response

This is in terms as to when the actual loan will be availed to you. The service response is a factor to consider as it allows you to know when you will be able to receive the money and hence start the project you want to undertake. You want a lender who has very few delays or none at all in how they deliver their service.

6. Proper Documentation

Although when approaching a private money lender you don’t expect much documentation there still needs to have certain documentation that shows the loan has been given and the terms and conditions.These documents may include a promissory note or in the case of property a trust deed or other document that can legally be enforced. It is mandatory that a prospective lender checks on whether the documentation is proper or not in order to avoid instances of fraudulent money lenders.

7. Strength

This factor you need to look at in terms of whether the private money lender you are approaching has the financial capability to bear the loan you need. You want a money lender who will be able to avail to you the loan you require. You can establish this by looking at their financial strength in the market, and how they are trading in terms of their assets vis-a-vis liabilities.

The above-stated factors are some of the things one should consider when looking for a private money lender. The list in itself is not entirely exhaustive and there can exist various factors depending on the sector one is requiring lending in. It is a matter of choosing what suits your needs and what is most convenient in your situation.