Are you planning to borrow money from a private lender? Worried about whether you are making the right choice? It was estimated that over 72.8 million loans were taken from alternative lending sources in 2020, an increment of almost 11.2% from the previous year.
Source: Statista
Before you borrow from a moneylender there are a few key points you should keep in mind.
Money lending and alternate sources of credit have had a bad name for quite a while, however, with recent developments the non-banking finance sector has seen significant re-organization and was brought under the finance ministry of most countries such as Australia and the United States.
Here are some of the key things to keep in mind when borrowing from a moneylender, ticking-off these categories when selecting a lender will save you from a lot of unnecessary effort:
1. Evaluate necessity and ability to repay:
Applying for a loan is a serious process. Making sure the reason for taking a loan is important makes the loan approval process a lot easier. Most lenders will be willing to give you a fast loan if the cause for availing of a loan is clear.
Secondly, being aware of the reason you are applying for the loan will make sure you don’t borrow for things you will be unable to repay. Applying for a loan to pay back another loan may not be the best idea financially speaking.
Finally, make sure you will be able to pay back the borrowed amount. Make sure you have some spare room in your budget to make room for the loan.
2. Borrow from a trusted source:
As you can infer, borrowing from a trusted source is the best way to avoid loan sharks and other bad elements. A private loan in Australia, New Zealand, Singapore ,or other countries, where the non-banking financial sector is legally recognized, is a safe and legal process.
Making sure that your lender is licensed by the financial authority of your country will ensure that fair practices are followed. Borrowing from an experienced lender will be preferential as they will be more used to the process and will be quite formal in discussions.
When evaluating experience make sure to check previous customer experiences and calculate their credibility based on past relationships and potential customers.
3. Decide your loan value and duration:
Prematurely deciding your loan amount is a good idea. Making sure you know the value you are planning to ask for before you go to the lender is important. Depending on the loan value your lender may be willing to offer lower rates of interest.
This is the same case when picking a loan duration. If you can, picking a shorter duration of payback will be optimum as it allows the loan lender to feel more secure and consequently offer you lower rates of interest.
However, remember to pick a rate that will be sustainable for you. Picking an extremely short loan duration without the means to pay back will work against you.
4. Your lender’s flexibility, rates and process:
Choosing a lender who allows a flexible payment scheme is essential. Those who offer such policies tend to care about customer well-being and will be easier to work with in the long run.
Once you have confirmed that your lender is flexible and willing to work with varying payment schemes, over the loan period, remember to check their rates of interest. Most lenders will offer relatively reasonable rates of interest, failing to offer a reasonable rate is a warning sign.
Finally, the process that your lender decides for your loan can be quite telling on them. The amount of time that your lender takes to process your loan tells you about their experience.
Banks can take several days or more to process a loan. Most experienced moneylenders and lending companies should have your money available in 24 to 48 hours.
Choosing the right lender can save you tonnes of trouble in the long run. The sad truth is that thousands of people struggle to work with strictly standardized loans. The only way out of these is to approach a private lender who can offer you the flexibility and freedom you require.
