For people who wish to make larger purchases in their lives, there’s a good chance that you’ll need to go through a private lender. This will give you the best chance of securing the necessary funding.
However, not everybody understands what they should about private lending rates. Let’s take a look at everything you need to know about these rates and the factors that influence them.
The Size of Your Down Payment
As you might guess, the size of your down payment will play a large role in how costly your private funding is. As a general rule of thumb, contributing a larger down payment will help you secure a lower interest rate.
In some cases, this might not be possible. However, a larger down payment will still diminish the total lifetime of your loan. This means that you will be able to pay off this amount sooner, thus paying less money in interest.
Your Annual Income
Those who make more money per year are seen as more reliable borrowers compared to those who make less. This only makes sense, as individuals who have an abundance of disposable income will be more likely to pay back the money they owe to lenders.
So, having a substantial annual income can drastically improve the loan terms that you are able to secure. More specifically, you’ll be able to borrow more money at once and take advantage of lower interest rates. Be sure to keep this information in mind.
Your Credit Score
It’s no secret that your credit score can affect many different areas of your life.
In fact, it can often be the difference between whether or not you can get approved for a mortgage, finance a vehicle, or even move into an apartment. Due to this, those who are seeking financing from a private lender will also experience similar situations.
However, private lenders often do not scrutinize credit scores as much as conventional lenders do. This is due to the fact that private lenders consider other criteria that normal lenders do not. As a result, your credit score is a factor that does not have as much weight in this situation.
This is good news for those who do not have stellar credit scores, as they may have difficulty finding a conventional lender who is willing to work with them. Want to learn more about what private lenders have to offer? You can look here for more information.
The more assets you have, the higher your net worth will be. Lenders to see this as an indicator that you could potentially pay off your balance one way or another.
To clarify, a borrower with a large number of assets could be sued for control of these assets if they do not satisfy the loan terms. Of course, it’s in everyone’s best interest to avoid a situation like this at all costs. However, it’s worth noting that simply having valuable assets can help get your foot in the door when working with a private lender.
You may even be able to secure more favorable interest rates by having a greater number of assets.
Your Loan History
Many people believe that their credit score is the only indicator of their capability to pay back loans.
Lenders also take your loan history into account. As the name suggests, this refers to how well you managed your loans in the past.
If you frequently missed payments or let a loan go to collections, your private lender will likely hold this against you. After all, this will explicitly tell them that they are at risk by lending you money. Those with a more favorable loan history should be able to secure financing with little issue.
How Can I Find The Lender Right for Me?
To find a lender who is ideal for your situation, you’ll want to research their reputation. This will provide you with insight into what kind of results you can expect from working with them.
For instance, there may be a handful of private lenders in your area who are notably predatory. They may attempt to charge additional fees, and they might also offer unfavorable interest rates regardless of how qualified you are to borrow. This could easily cause you to spend much more money than you should when paying back your loan.
What Is a Typical Private Money Lender Rate?
In general, you can expect to pay between 6% and 15% in interest on any loan that you borrow from a private lender.
This amount will be heavily dictated by the factors listed above. The total length of your repayment plan will also play a role. The longer your loan term, the lower your interest rate will be.
However, paying off a higher interest rate loan quicker will cost less money than paying a long-term loan that has a lower rate. So, be sure to consider this when browsing different private lender interest rates.
You can look here for more information about working with a private lender.
Understanding Private Lending Rates Is Essential
Otherwise, you might not be able to secure private lending rates that are ideal for you. Since even a marginal difference in potential interest rates could mean tens of thousands of dollars, the above guide will be an invaluable resource on your search. Looking for more tips that can help you out later on? Check out the rest of our blog for plenty of more useful information.