A credit transaction with a bank is referred to as a credit institution that grants the loan. If the processing of the loan is agreed with the private lender, it is referred to as a money lender. There are many reasons for applicants to contact a moneylender. The self-employed in particular often have problems obtaining a loan from the bank due to their uncertain income situation or a lack of collateral. In this case, the private money lender can be a solution to obtain the desired liquidity, because the private money lender decides himself and completely individually with whom credit transactions are carried out. However, banks sometimes refuse to grant credit to private applicants. This may be due to the fact that the creditworthiness does not appear to be sufficient or that the applicant has negative Schufa characteristics. In both cases banks refrain from granting loans. However, the borrower can still try to obtain the desired loan from a private money lender. On the one hand, private money lenders often have more goodwill in granting loans, and on the other hand they decide with which business partner they agree to lend without the fixed guidelines that a bank sets for granting loans. It is important for the contract discussions with the private money lender to go prepared into the discussion. This includes that the applicant has accurate and clearly identifiable proof of income and expenditure. The income can be substantiated by proof of income – as a rule, the last three current pay slips are sufficient here. Self-employed persons can prove their liquidity by submitting income tax assessments. It is also important for the discussion that the monthly fixed costs are broken down precisely. This enables the moneylender to see immediately whether sufficient economic funds are available to repay the loan regularly. If there is equity capital or other collateral in the form of assets, the money lender should also be informed so that his own creditworthiness increases. The loan can be secured by existing life insurance policies. The rights to the insurance are transferred to the money lender in the case of credit business. If the borrower is in arrears with the payment, the money lender can make use of the life insurance to indemnify himself. An alternative can be the integration of a guarantor to secure the loan transaction. In this case, the guarantor shall be examined as thoroughly as the applicant as regards his income. If the borrower defaults on the payment of the instalments, the guarantor immediately enters into the payment of the loan. For the guarantor, this means that he is liable for the entire loan amount taken out and, in the worst case – i.e. the applicant’s complete default – must pay it back in full, including any fees and interest incurred. The guarantor enters into the loan agreement as a third party and is therefore liable with his complete attachable income and all asset shares. Serious money lenders can be recognized by the fact that they work with moderate interest rates, even if private money transactions are often somewhat more expensive than classical credits from the credit institute. In addition, reputable money lenders do not charge any preliminary costs that the applicant must first pay before the loan agreement can be concluded.
Finding the right private money lender
There are several ways to find the top rated licensed money lender. One of the easiest ways is to ask friends or relatives for credit. However, when granting loans between friends and relatives, you should also draw up a precise contract that contains not only the amount of the loan but also the term of the loan and the amount of the monthly instalments. To this end, any interest that may be levied should also be set out precisely in writing. Money lenders should not act on trust in the private sector either. An alternative could be to reply to an advertisement in the newspaper. It is not uncommon for private individuals to advertise themselves as private money lenders. However, it is important here to check carefully whether it is not ultimately a covertly working professional money lender and, above all, whether the conditions are acceptable. One of the newest and safest ways to find a private money lender is to search the Internet. There are now professional portals here that act as intermediaries between money lender and private borrower and that charge a fee for their services.