Ultimate guide to private money lending

Private money lending may seem like an appealing concept for those looking to bypass traditional lending. But is this concept too good to be true? While there are some benefits of private money loans, there are also some alternative lending options that you need to be aware of before entering into such an agreement. Use this ultimate guide to private money lending to make the best possible financial decision.

What Is a Private Money Loan?

A private money loan is a loan provided by an individual to another individual. While private money loans may be given by friends or family, this isn’t always the case. For example, private money loans could also be provided by angel investors to fund a potential business idea. No matter who is giving the loan, this type of agreement bypasses the requirements and rigidity involved with corporate and institutional lending.

Why Use Private Money Loans?

There are several reasons why you may want to use a private money line. Perhaps you’re young and want to start your own business but don’t have the cash or the credit history to do so on your own. A friend or family member may lend you the money you need to start your business, or you could find an individual investor to help you out.

On the other hand, you may want to purchase something like a car or a home, but you don’t meet the strict qualifications set by big banks in terms of a favorable credit score and consistent employment history. A friend or family member may be willing to give you a loan to cover the costs of the asset until you can improve or build your credit to qualify for an actual loan and pay them back.

Benefits of Private Money Loans

Private money loans may be the right loan option for you, depending on your financial situation. Here are some of the benefits of private money loans to consider:

  • Fewer requirements: Private money loans could be a good option for those who don’t meet the requirements set for traditional loans. For example, many loans given by big banks require good credit scores and a consistent employment history of at least two years. Private money loans, on the other hand, do not have such strict requirements and are more accessible for those with poor or nonexistent credit histories.
  • Easier process: The application process for private money loans is quicker and easier than alternative methods since the process is entirely up to the individual rather than a corporate entity. Generally speaking, you won’t have to submit documentation or have your credit pulled when you’re getting a private money loan.
  • More flexible terms: Furthermore, since private money loans are given by individuals, they often involve more flexible terms. People are more likely to negotiate than big banks. As a result, you may be able to negotiate more favorable terms for the loan down the road.

Alternatives to Private Money Loans

Perhaps the most obvious alternative to a private money loan is a traditional loan from a big bank. However, this option may not be possible or even beneficial for every person and every scenario. While you may think that you are stuck between either a loan from a big bank or a private loan from a friend or family member, there are other loan alternatives that you should know.

First of all, there are hard money loans that are able to get you money quickly without strict credit or income requirements. This is because hard money loans use collateral to qualify you rather than typical loan qualifications like your credit score or employment status. In fact, hard money lenders aren’t even that concerned about repayment because they know they will be able to get their money back through collateral if you aren’t able to pay. Nonetheless, hard money lenders often charge high interest rates in the 10 to 15 percent range and may charge additional fees on top of that.

In addition to hard money loans, there are also bridge loans. These short-term loans are designed to quickly get you the money you need while you wait to secure permanent financing. As you probably know, traditional financing can take time to apply for and process. However, sometimes you don’t have time to wait — which is where bridge loans come in. Bridge loans also have less strict requirements in terms of credit scores and employment, although your credit will be run to ensure there aren’t any prior credit delinquencies. Although interest rates are slightly higher for bridge loans, they are typically lower than hard money loans, ranging from 7.5 to 10 percent, depending on your qualifications.

So before you go begging your friends and family for loans to cover the cost of a real estate investment, consider alternative loan options that are less risky in terms of overall costs and potential damages to your personal relationships.

Where to Find Alternative Lending Options

Now that you know a little bit about these alternative lending options, you may be wondering where you can find them. After all, not every lender out there will offer hard money loans and bridge loans. Instead, you may have to consider alternative lenders outside of the traditional big banks or investment firms. 

If you’re looking for a great lender that offers favorable terms for bridge loans, look no further than Vaster Capital. Vaster Capital is the premier bridge lender that offers financing for everything from multi-million dollar commercial real estate projects to the average single-family home.

How to Choose the Best Loan Option and Lender

While alternative lending options may be beneficial in many circumstances, the right choice for you really depends on your unique financial situation. For instance, foreign investors may want to apply for a bridge loan if they don’t have a solid credit history in the United States that would qualify them for a traditional loan. Additionally, homebuyers may want to apply for a bridge loan if they’re looking to make an offer on a new home without contingencies that may decrease the appeal of their offer.

Overall, the right research and due diligence can help you choose the best loan option and secure the best lender. When choosing a lender, make sure that they are transparent and responsive. Vaster Capital prioritizes transparency and always provides you with all necessary information about your loan terms, conditions, interest rates, and repayment timeframes. We also prioritize customer support and will be there to guide you through the loan process from application to closing. After closing, we remain by your side to guide you through the repayment process and work with you to make any necessary adjustments along the way.


Private money lending can be a beneficial option for those looking for a flexible and accessible loan from a friend or family member. That being said, these private loans can be costly in terms of money and in terms of relationships. For that reason, you may want to consider other options like bridge loans to help you secure the property you’ve been pursuing. For more information about bridge loans specifically or real estate lending in general, feel free to reach out to the experts at Vaster for professional insight and advice tailored to your unique situation.



Private Money Lending FAQ | FortuneBuilders.com

5 Personal Loan Requirements To Know Before Applying | Forbes

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