What is a Private Money Loan?
Private money loans – or simply private money – is a term used to describe a loan that is given to an individual or company by a private organization or even a wealthy individual. The organization or the individual is known as a private money lender.
Private money is usually offered to borrowers without the traditional qualification guidelines required by a bank or lending institution. The major issue is that private money loans can sometimes be very risky, both for the borrower and for the lender. With less regulation, the borrower enjoys more freedom to use the loan for less than ideal purposes.
Most private money loans follow the current prevailing interest rates. However, they may be significantly more expensive. When the lender knows what the loan will be used for, it may charge a higher rate of interest if the risk level of the proposed enterprise is high.