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Who are Private lenders?

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Private Lenders

You want to build your dream house and looking to get loan from an organized bank, what if, you have a bad credit score. In the current situation of increasing non-performing assets, banks are very critical about lending loans. In this case, you probably will not get a loan from bank

What about your dream then?

You can ask a friend or your family member for loan or collateral with little or no interest. If nothing works out for you don’t worry, you can go to a private lender.

Private lender is one who is not regulated by the central bank in India (Reserve bank of India). So, there is no upper limit for interest rates charged by private lenders.

Advantages with private lender

  • Less or no paper work; funds will be released instantly so, you can right away start your work.
  • They will never look at your credit score.
  • No prepayment penalty.

Disadvantages with private lenders

  • Interest rates will be high compared to other formal sources of money lenders like banks, non-banking financial companies.
  • There is a chance of cheating; since the lending procedure is not transparent.

So, I suggest you to go for private lenders only as a last resort.

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4 COMMENTS

  1. Private lenders can be anyone who is rich enough to provide money to others. It can be a group of an individual. It is true that borrowing money from them is easy, but it is always advisable to check the background first. The chances of such people being fraudulent, black marketeers, havala traders, etc. is very high. As rightly said in the article, consider them as a last resort.

  2. Private lender may appear to be a good option for a person with lower income and not eligible for a loan. But one must not take banking decision in a hurry. The article would be of great help in this. More than the advantages, the disadvantages are useful. They suggest one to get all the necessary details of the lender and warn them as well of the risks involved and hence the losses.

  3. This seems very shady to me. The only private lenders I have heard about are “loan sharks” who try to make you pay some outrageous amount of interest on your principle sum or else break you legs or something else very dramatic.
    It sounds dangerous, and I would rather borrow my money from an institution that has to be surrounded by rules and regulations.

  4. Private lending is a traditional method of lending money when bank did not exist. This method might look attractive but it is not so. There is no transparency plus the interest rate is higher as compared to the banks. So it is always advisable to go for it as a last option.

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