No one is immune to the cases when a certain amount of money may be required immediately. A loan from individuals can be the best way out in a difficult situation if a person cannot contact the bank for objective reasons.
The popularity of this lending type is growing rapidly because of the following advantages:
- Time is saved – it takes no more than a day to get the required amount.
- No need to collect documents – an ID is enough.
- No need to search for guarantors – the decision does not require their presence.
- You can get money even with an unfavorable credit history.
- No fees for reviewing the application.
- The opportunity to discuss the loan repayment terms.
An unemployed, student, pensioner or person who suddenly finds oneself in a difficult financial situation has high chances to quickly receive the necessary amount of money from direct lenders.
Who Are Private Lenders?
You should know that this is a person with extra money, which he/she is ready to invest in profitable transactions. More detailed information about the creditor may be unavailable. Often, people who have previously worked with clients (bank employees, employees of insurance companies, entrepreneurs, real estate agents) have resorted to such activities. Previous experience has helped many to create an initial customer base.
Most private lenders value their reputation and are interested in attracting new customers. But there is a risk of finding scammers. The activities of private investors are not supported by official documents. Therefore, when discussing the conditions for obtaining a loan, caution is required.
Terms of Obtaining Direct Loans
Lenders, like borrowers, are afraid of scammers, so they prefer to use pledges. This allows them to minimize the risk that the loan will not be repaid. In such transactions, the creditor asks for documents that confirm the ownership of the proposed collateral. This can be an apartment, private house, land, car, garage, etc. The value of the pledged property must exceed the amount of the loan.
After discussing the size of the loan, collateral, interest rate, payment terms, the transaction should be documented. The interest rate on a secured loan can be set individually in each specific transaction. The common rate is 30-45% per annum. A pledge is a prerequisite for a long-term loan.
Documents for Direct Lending
Certification of documents by a notary is not a prerequisite, but for the security of the transaction, the presence of a third party will not be superfluous, especially when it comes to a large amount.
The contract shall contain the following data:
- information about the borrower and lender (addresses and ID data);
- the amount issued and date of issue;
- the interest rate;
- the terms and procedure for repaying a loan;
- the full repayment period;
- the amount that the borrower must repay;
- penalties in case of non-repayment of loan debt.
A loan from individuals without collateral is also a fairly common service. Lenders compensate for possible risks with high-interest rates. These risks are at least 60% per annum. Loan periods without collateral are shorter.