When considering a loan, it is important to understand where the money comes from. The concept of lending money is almost as old as the creation of currency and while the types of loans offered today have expanded, the sources of capital remain the same. Either the entity creating the currency can make more of it, or a person who has saved it in excess of their needs can lend it to others. In its most simple terms, a private lender is a person or business who is lending you their own money. This can be money that they have saved or money they have borrowed for the purpose of lending. Private lenders are just people like you. They have saved money and are looking safe investments in which, their money can grow. Private lenders are individuals and because they are lending their own money, they get to decide what loans make sense for them and they get to set the terms of the loan.
In contrast, banks and credit unions are institutional lenders. They borrow money from groups of people “their depositors”. They entice depositors to lend them money by either paying them interest or by offering financial services for the use of their money. The bank’s depositors are their source of capital and in return, the bank has control of their money to make investments and loans. Because the cost of their money is quite low, they can lend that money back out to us at a lower interest rate and still make a profit. The way they make profits and the governmental regulations of the types of investments each bank can make has become increasingly complex. These complexities are the reason why getting a loan from a bank takes as long as it does and why qualifying for a loan can be more challenging. To learn more about what separates hard money from conventional lending check out our article Private Money vs. Hard Money
A Private lender who is lending you their own money can set their own requirements and thus can make loans on projects that banks can’t or don’t want to make. Private lenders commonly overlook things like credit score, back taxes, bankruptcy’s, and other things that would keep you from qualifying from a more conventional loan. When a loan is made it is expected that the borrower owns something of value or is purchasing something of value. The lender who is putting up the money for the purchase will want to secure their loan by that asset. The most common asset for a private money loan is real estate. The lender will secure their loan by putting a lien on the property for which the loan is given. A lien allows for the borrower to own and control the property but allows for the lender to sell the asset if the loan is not paid back.
Because private lenders are just people, they can be varied in their ethics and business practices. It is our recommendation that you only work with someone you trust. If you do not personally know the person you are borrowing from it is always a good idea to get a recommendation from people or groups you trust. Talking with those who have past experience with that lender or the reviews from others are important steps any borrower should do before choosing to take a loan from an individual.
Northwest Private Lending is a small family business and our family has been making private loans for the last 30-years. Our size allows us to get to know each of our clients, and they get to know us. Northwest Private Lending prides itself on making quick and fair decisions on new loan requests and has consistently followed through on our commitments. NWPL has a long track record of treating people fairly and have created a transparent model that allows for authentic review of our loan process and business practices. We spend time with each of our borrowers as they consider their lending options and always seek to help our clients make their best decisions and encourage our clients to evaluate all their lending options. We make loans collateralized by all forms of investment real estate and generally lend in the range of $25,000 to around $1,500,000 per loan.