Private Loans

Private loans are amounts of money given by the lender (the person lending out money) to a borrower, for a certain duration of time with the agreement to pay either a fee for the amount borrowed or at an interest coinciding with the duration of the loan.

Usually, the loan is an unsecured loan, which means that the amount borrowed is not backed by collateral. The purpose of collateral serves as a promise that in the event the borrower defaults on the loan, the collateral is given to the lender in place of the money lost. The lender then owns the collateral, whatever that may be.

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Peer to peer lending is a form of an unsecured loan. Most often people go this route because the borrower has a low credit score and a bank will not loan out money to them. Peer to peer lending works much the same as all other forms of borrowing money, whether it is through cash advances, credit cards, or other types of loans. A "peer" is simply any person with the means available for loaning out money. It is called peer to peer because the borrower is not borrowing from a bank or some other financial institution. Peer to peer lending involves a lender lending money to a borrower who pays either a flat fee for the amount borrowed or at an interest.

Because peer to peer lending is a form of unsecured loans, and therefore collateral is not used as a form of promise for payment, the borrower can only give his/her word on repayment. This type of agreement is at the sole discretion of the borrower. The borrower gives his/her basic identification to the lender from which the lender makes a decision whether to loan out money to this individual.

However, there are many sites now that offer discreet lending and borrowing. A group of lenders "invest" by placing their money into an account of some sort of which a borrower takes a loan for. There is no direct contact between the borrower and the lender through this type of site. The arrangement of this type of site determines that the borrower make monthly payments for the loan taken. The lender simply receives the original amount loaned with interest in increments depending upon the agreement of the loan. Some types of peer to peer lending do not require a credit check; yet, others do.

The rates on private loans vary; however, because it is an unsecured loan, the interest rate is often higher than a loan backed by collateral. Interest rates are higher on unsecured loans because of the fact that they're unsecured. An unsecured loan means a higher risk of default. However, to counter this fact, the lender has basic information regarding the borrower's employment information. Depending upon the borrower's individual circumstances (e.g., employment status, loan amount, and credit rating), the annual percentage rate, or APR, can vary from approximately 6 percent to approximately 35 percent as of the date this article was written.

Likewise, the amount that can be borrowed varies as well. Typically, peer to peer lending caps at about $5,000. Conversely, the minimum amount that can be borrowed is about $100. This again greatly depends on the individual borrowing money. The only way to know is through research into various companies and/or sites providing loans.

At times, when you need cash fast and don't have other options available, peer to peer lending or other forms of private loans are wonderful. It's a discreet method of securing money quickly. If a person can easily repay the loan, it's a wise option.

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