There are various reasons why people need to borrow money. It could be to pay their bills or tuition fees, home renovation, travel allowance, purchase of new appliances, medical needs, and many more. Whatever the reason is, there are tons of private lenders out there that are willing to provide you with the cash that you need to solve your problem.
However, before you submit your loan application, it is important that you know quite well what you are getting yourself into. It would be wise to know the pros and cons of borrowing money from private companies.
Pros
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Few Financial Documents
If you have already tried applying for a bank loan, then you must know by now how strict they are when it comes to the requirements. You must gather all the financial documents that they need from you. But take note that completing all the paperwork is not a guarantee that your application will be approved. This is why most borrowers prefer to go to private lenders instead.
These companies will only require one or two valid IDs, proof of income and address, and you are good to go as long as they can determine that you have the means of repaying the loan.
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Quick Approval
Unlike banks, private lending companies won’t make you wait for a couple of weeks or even a month for them to evaluate your loan application. In fact, some lenders can approve your application and release the money in just a day.
Cons
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Short Repayment Period
Most private lenders will require you to pay them back in a very short period of time, which means that the monthly payment could be too high. Therefore, if you are working on a very tight budget, this might not be advisable. This could definitely stress you out later on. And if you are unable to pay on time, you can expect late charges, which could add even more to the burden.
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High Interest Rate
Another disadvantage of borrowing money from private lenders is the high interest rate. Also, there will be a service charge and other hidden fees that will be deducted from the loan proceeds.
If you have had a bad credit history, it is most likely that the interest rate that will be given to you will be high.
These are just some of the pros and cons of taking out a loan from a private lending institution. It is not bad to borrow some cash. However, you really need to weigh things out. Take a look at all your options and choose a good deal.