The 3 Step Process Required for a Private Loan
If that’s not the most over-reaching statements ever mentioned, it’s definitely close to one of them.
But it’s true. Our financial situations are often in flux as we navigate life, work and all the challenges with which we’re faced. We see different situations all the time, some that are difficult, some that are natural. Situations such as:
- buying property
- behind in property taxes
All of these instances require quick cash flow injections, but it’s not as simple as heading to the bank, signing a couple things and walking out cash-in-pocket.
Here’s our short 3-step process for securing a private loan.
1. What Do I Need?
“The first, basic step is an application form,” says Mark Chala, a lending specialist here at One Stop Mortgage.
You see, the alternative financing world is about human interaction and planning a course specific to the borrower. That’s where the evaluation enters, an evaluation of a borrower’s existing property and the equity in that property regardless of credit or income.
Once equity is determined, an exit strategy is planned. How will the loan be paid off? The exit strategy plots a course ahead of time so the borrower can rest easy knowing precisely how and when payments will be made.
Sometimes a personal letter is required detailing the borrower’s needs as well as the circumstances that made the loan necessary. This creates a ‘fresh start’ date, the instance at which the loan will be paid off.
2. How Does it Work?
Alternative financing lenders deal with every client on a case-by-case basis, backed by experience dealing with lenders and borrowers.
“We decide whether ornot it’s a deal that will work, we get conditional approval for the borrower and then the lender makes a decision,” that’s Mark Chala again.
One of the most important aspects of private deals? The location. Often small towns in Alberta and BC are forgotten because they exist off the beaten path, but lenders who grew up in these towns or are familiar with local conditions will feel strongly about these deals. Often lenders who move away from the small towns in their youth will accept deals in these places as a means of giving back.
Once a deal and plan is accepted, life continues as normal for both the borrower and the lender.
3. The Value to Lenders
Unlike dealing with a bank, alternative finance lenders value different types of deals. Some have an appetite for large first mortgages, some prefer second mortgages, and other rate differently based on their appetite for risk. Experience comes into play and human-to-human relationships without the bank matrix provide the foundation for a deal that benefits all concerned.
The other attraction to lenders, particularly when it comes to smaller areas in BC and Alberta, is the stability of local housing prices. The pay-off in cities like Vancouver, Calgary and Edmonton might be higher, but people undergoing financial stress might be more likely to make things work in towns with lower prices and a slower pace of life.
The key to the entire process is finding a plan that works for both the borrower and the lender. This can be influenced by several factors, so it’s important to lay those factors on the table and plan each and every detail.
A private loan can be a positive step toward something bigger, something greater in your life. Like we said, life happens, and sometimes unforeseen circumstances rule the day.
But that doesn’t mean they have to rule you.
Need a private loan? We’ve got you covered, apply online today ->