The Pros and Cons of Private Money Loans

In the post-pandemic era, many people and businesses are using private money loans. Here, you can read about the main pros and cons of private money loans to discover whether they’re right for you.

What’s a Private Money Loan?

In simple terms, private money loans are loans that you receive from private lenders. These types of loans aren’t provided by banks or credit unions, hence why they’re called private loans.

Whether you’re an entrepreneur who flips houses or a construction developer looking to start a big project, anyone can apply for a private money loan. However, you’ll only get the green light if you tick the right boxes (for example, if the private lender can see that your project has profit potential).

With that said, let’s take a look at the pros and cons of private money loans.


Firstly, here are the pros of private money loans.

1. Fast Funding

One of the best pros of private money loans is that you can get them incredibly fast.

When you try to get a loan from a bank, the process can be long, tedious, and frustrating. However, when you go through a private lender, everything is a breeze.

In some cases, providing your application is successful, you can get the money within a matter of weeks, allowing you to move forward quickly and get to work on whatever you go the loan for, whether it’s purchasing a new home or starting work on construction.

2. Extendable Terms

Private lenders are usually flexible when it comes to extendable terms.

Let’s say that you’re renovating a home with the loan money that you received. The renovation is going well, but it’s taking longer than you expected. You’ll be able to open up a dialogue with your private lender, let them know what’s going on, and they’ll more than likely adjust your terms accordingly to fit around a new deadline. As a result, you won’t feel stressed and they’ll be no need to worry about missing monthly repayments.

Of course, each private lender is different when it comes to extendable terms. The good news, though, is that you can speak to them in the loan application process so that you know what to expect regarding this if you need your terms extended in the future.

3. Low-Interest Rates

There’s a popular misconception out there that private money loans come with huge interest rates, but this simply isn’t true.

According to LinkedIn, the current interest rate for short-term private lending is 8.5% to 11%. This is great news and indicative of the fact that private money loans come with affordable interest rates.


Now, it’s time to discuss the cons of private money loans.

1. You Need a Good Credit Score

Typically, most private money lenders want you to have a good credit score. Without one, you’ll find it almost impossible to get one unless you can do some serious convincing. So, if you currently have a bad credit score, you need to get a good credit score.

2. If You Can’t Repay Your Loan, You Might Lose Collateral

If you can’t repay your loan, the private lender might ask you to put up your collateral, such as your car. However, this will only occur during extreme circumstances and is also dependent on the terms that you signed with the private lender.


Good luck with getting your private money loan. If you have any further questions, you can contact the private lender that you’re interested in using.

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