It is safe to say that getting a home loan has been difficult in recent times; this is not due to low mortgage lending rates, rather the difficulty lies in getting loan approval due to strict loan requirements for most.
In such cases, the best option for a person is to approach a private lender willing to offer a deal for the purchase of the house or apartment. Private lenders typically asses the risk and can decide whether or not they should proceed with the loan amount. While certainty is not a big factor here, what is assured is the flexibility that private lender offers to the potential homeowners; these are generally funded by friends, family, or a business. If you are looking to crack a deal with the best mortgage in your area, you must check out the offers by Mortgage Connection
Bank loans are difficult due to the inability to change or mold the terms of the loan in a beneficial way for the customers, whereas a private loan assures one of flexibility and convenience. There are many other advantages as well as a few disadvantages when working with a private lender and some of them are briefly discussed below.
Advantages of working with a private lender
One of the key benefits of working with a private lender is the fact that there is much less hassle and also lesser documentation that is required for the approval of the loan. Although that is not guaranteed, there are higher chances of approval for the full loan amount than with a bank or a financial institution.
The main documents that are required for private lenders are two forms of identifications and proof of regular income. This is a far cry from the financial and banking institutions, which require numerous documents for approval.
Another key advantages of private lenders are that fact they the loan can get approved in a single day; whereas, with a banking institution, you may have to wait for days, and sometimes weeks for the application to be approved or decline, while waiting on tenterhook for the approval or decline.
A short repayment plan is great for couples and individuals looking to flip their property of a profit. The short term loan, then is an advantage, without getting encumbered for 30 years, which is the normal repayment time-frame for banking institutions.
Disadvantages of private lenders
Short repayment time is also a disadvantage for many, especially first-time homeowners. This is because, with a shorter repayment plan, the interest rates are also much higher. This is a major drawback for individuals, already struggling to make regular payments but cannot qualify for a home loan through traditional and conventional methods through banks.
As private lender offers and closes the deal, oftentimes, without a couple of days, it is vital for the loan approval that borrowers close the deal as soon as possible. This is because unlike financial institutions, private lenders have that capital waiting to be disbursed so that they can earn interest out of it. Therefore, if confirmation takes more than a couple of days, the lender is likely to lend it out to someone else, where the money will be earning interest for their benefit.
These are the main difference between a banking institution offering lower interest rates in case you qualify for it, and have long repayment plans which are always beneficial for the borrow. On the other hand, not all get approved for the loan, and it requires a lot of applications and the wait for the approval or decline is also long, leaving borrowers in a lurch.
Whereas choosing to work with a private lender may ensure that your loan application has been approved within a day but will result in a shorter repayment time and significantly higher interest rates, making it a risky deal throughout.
Choosing the right lender is based on an individual’s circumstances and through research.