Personal Money Lender
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A personal money lender can be from one's own family or from banks that offer unsecured loans with high interest rates. Lenders that offer unsecured high interest loans also advertise cash advances, and payday loans. A personal money lender is often used by those who can not get approved through other financial institutions because of bad credit. To avoid having to pay such high interest for borrowed funds a person should consider living on a budget, paying all debts on time, and looking over his or her credit report for any possible errors that could affect scores. "The rich ruleth over the poor, and the borrower is servant to the lender" (Proverbs 22:7).
A consumer who just needs some extra cash because of a tight financial situation should try asking a family member for a loan before looking for a personal money lender. Normally family members and even friends do not charge another family member interest. When borrowing funds from family and friends the borrower should always pay back the money as soon as possible or as agreed because not doing so might mean that future borrowing may have to come from some other place. Of course it would be best not to borrow at all but sometimes it can be necessary. Everyone has unforeseen circumstances that happen which require extra cash now and again. A wise person will open a savings account to help in these types of situations.
Banks and other financial institutions that advertise cash advances often do so with a few restrictions. A borrower may need to have a checking account and a steady income coming in before they can qualify. A personal money lender will normally set up a way to provide them some security in getting their money back. To pay back cash advances a bank will auto draft the cash advance into the borrower's checking account. When payments are due then an auto draft is sent to the lender's bank each month until the funds are paid back. Oftentimes banks set up a borrower to have reoccurring cash advances as long as they receive payments on time every month. The drawback to getting cash advances is the fees and the high interest rates involved.
Payday loans work the same way as cash advances and they too have high interest and fees associated with them. A personal money lender can justify the high interest rates and fees because the loan is unsecured. In other words, there is no collateral in case of default by the borrower so the bank raises interest and charges fees for compensation in case of default. A borrower should shop around when he or she is in a pickle for some cash before taking out the type of loan that will cost an outrageous amount or figure out a way to put up some collateral such as property, jewelry, or an automobile. Putting up collateral could cause the bank to lower the interest rate because the risk of loss is less if the borrower defaults.
Personal loans are also known as signature loans. Signature loans have high interest rates just like cash advances and payday loans because the bank lending the money considers their risk of being paid back to be high. A personal money lender is used more often by consumers with bad credit than by ones who have good credit. People with good credit will be able to get lower interest rates when borrowing funds because they are seen by banks as less risky. A borrower with good credit is probably someone who watches his or her spending and lives on a budget. Having bad credit is not a sentence that has to be carried for one's entire life. There are ways to change by becoming more responsible and doing some self credit repair that can help to raise credit scores so the chances of getting a low interest personal loan are higher.
Some lenders that offer personal loans do not check a borrower's credit and do not base interest rates on credit scores. They charge the same interest rate to everyone who borrows. With this type of situation a personal money lender knows they can make some money off of people who are in a bad situation and need help. Lending institutions that do business with these types of tactics should be checked into carefully by the person who is looking to borrow from them. A borrower should make sure they are legitimate and have not been turned in to the Better Business Bureau. Really it is best to do business with someone who has been referred by a friend or family member than to just blindly choose someone you know nothing about.
There are many reasons why a person would be willing to pay very high interest rates and high fees to borrow some cash. Maybe the person does not have health insurance and needs to go to the doctor or has a sick child who needs to go to the doctor. The weather may be very cold and the heat is about to be turned off because the potential borrower could not pay the heating bill. Every person gets down with a problem now and again that requires asking for help. The main thing to remember when taking out a loan with a personal money lender is to not make it a habit. Instead find a way to budget money and live carefully so that there will not be a need for borrowing in the future.
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