How to Get a Private Money Loan

The combination of high interest rates and short repayment schedules makes a private money loan unsavory to borrowers. These loans are favored by a variety of people who need to cross the chasm between the status quo and business expansion. Have a plan in place to repay borrowed funds before you get a private money loan.

Difficulty: Moderate

Instructions

Things You'll Need:

• Copy of credit report
• Land appraisals and photos

1. Monitor your credit score before you get a private money loan. Most private lenders do not require an updated credit report as part of their applications, but it will help you gauge your financial status before receiving a loan. In the event your credit report is required, it will help immensely to correct inaccuracies or alter negative behaviors prior to applying for the loan.

2. Organize personal and business financial statements as you approach private money providers. You need these documents to get private money loans because lenders want to see some proof of your ability to repay the loan.

3. Heed early payment penalties on loans involving private money. Lenders will typically set a minimum amount of time you need to provide payments for a loan in order to collect sufficient interest to cover these high-risk loans.

4. Prepare a portfolio of information about the property you are using as collateral. This information should include a complete ownership history, intended use for the land and appraisals of the property to help determine the loan-to-value (LTV) ratio.

5. Visit different lenders in your community to find the best rate for your private money needs. The loan amount and agreement terms vary from lender to lender, because the prevailing rate is not based on the federal interest rate.

6. Look outside of your home state to get private money loans. The lack of regulation on this type of loan provides borrowers the opportunity to find funding in several different states if they have a number of large projects.

7. Shift profits from the use of your leveraged land in order to pay off private money loans. Most lenders allow you to provide a direct deposit of money from your business account based on the amount of money brought in by land use.

Tips & Warnings

• Read the loan agreement with a private money provider to determine additional fees. Lenders will often apply a fee for administrative work, appraisal and a general lending fee for the high loan amounts provided. Request clarification of unexplained fees before committing to a private money loan.