New Finance

10 Reasons Why Private Lending is an Attractive Option for Investors

10 Reasons Why Private Lending is an Attractive Option for InvestorsIf you’re seeking an alternative to investing in the stock and bond markets, you may want to consider private money lending in the property market. By being careful and diligent, you can earn greater returns on your investment while minimising your risks as a private lender. You’ll also have many opportunities available to you and low levels of responsibility. As banks now have stricter requirements for loan applications from borrowers, private lenders are in high demand.

If you have the funds to invest and want to improve your earnings, simplify the process of investing or diversify your portfolio, you may find that being a private lender is the smartest decision you’ve ever made. Here are 10 benefits of becoming a private lender:

1. Secured loans

When lending on private mortgages, your money is secured by a registered mortgage against the borrower’s property. The borrower will then pay you interest until the loan is repaid. If you offer a 70% loan-to-value ratio (LVR) and you’re forced to foreclose on a non-performing loan, you could already have 30% equity built up in the property. A specialised solicitor will prepare and register all your mortgage security documents to ensure that your mortgage is fully secured in order to eliminate foreseeable risks. Plus, the borrower will be the one to pay the solicitors’ fees.

2. Secure lending process

Having an attorney verify your paperwork (e.g. a Promissory Note and Lenders Agreement) or draft a contract will protect you completely. Reviewing the terms with the borrower will also help you to avoid legal complications that cost a lot of money. Furthermore, if you search for and use a good escrow company and title company, you can guarantee your money will be handled professionally and legally, meaning you know you’re going to get paid.

3. Choose your own loan criteria

Your lending criteria can be more flexible than the banks. For example:

  • You can choose to lend money for either residential or commercial property.
  • If you prefer to lend money for residential property, you can specify whether you want a townhouse or a four bedroom house, a single family or a couple, or any other type of situation.
  • You can also choose whether the property is non-owner occupied, owner-occupied or a short-sale property.
  • You can choose how much money you want to loan, e.g. 60% or 80% LVR.
  • You can also determine the type of return you’d like on your money within a certain time period, e.g. 6% return on investment (ROI) within 3 months or 8-20% ROI within a year.
  • You can get a broker’s price opinion or a comparable appraisal by an appraiser so you don’t get sued and know that the investment you’re going into is actually worth what the borrower says it’s worth.
  • You can ask the borrower to hand in a proven credit track record showing that they can make payments and repay the loan.

To get the greatest returns, pick your criteria and stick to it.

4. Multiple ways of making money

As part of your loan criteria, you can also choose how much interest you’ll charge the borrower (e.g. 6-15%) and if it accrues monthly. Or you can charge points (which is the percentage charged monthly and at closing), e.g. charging 2 points for a $100,000 property means you make $2000 a month and when the loan closes.

5. Fixed yield returns

Investing in private money loans gives you fixed yield returns and pays off at maturity. For example, if you loan $100,000 at 8% interest per annum and require only interest payments, then you’ll earn $8,000 a year. If the borrower doesn’t default, the loan will be paid off at or before it reaches maturity and you’ll get back the original principal amount.

6. Short lending periods

With private money lending, you can recover your capital in a shorter period of time, which means that you can better protect yourself against different types of risk. Most private loan terms range from 9-12 months. Your loan criteria can also specify how many months you want the loan term to last for, e.g. short-term (3-6 months) or long-term (6-12 months).

7. Diversify your money and lower your risk

You can work with other private lenders to diversify your money and lower your risk. For example, you can invest in a pool that gathers funds from other investors to create one entity for loaning money to borrowers. Or you can diversify your money by using multiple fractional loans with ten investors, e.g. each investor lends $100,000 for a $1 million loan. Loan decisions will be handled by the pool/fractional loan manager and your money is diversified across different types of loans.

8. Earn higher returns with junior liens

A junior lien is a second mortgage. You can earn a higher rate of return by investing in a first mortgage and then buying a second mortgage or other more junior liens. If you choose to go down this path, another benefit is that there’s less initial cash outlay.

9. Spend less time managing your portfolio

If you don’t have enough time but you have enough money, you can work with a private lending company with a good track record to manage your money. If they invest in real estate, they’ll know how to best manage your portfolio and could probably guarantee you a 6-8% ROI. Working with a private lending company will also allow you to free up some of your time.

10. No costs or setup fees

You can apply to become a private lender at Easy Settle Finance, where we help facilitate lending transactions between lenders and borrowers. You don’t have to take a course or fill in an application form. Just call us or register your details online and we’ll determine what lending options are best for you depending on how much money you have available. After you’ve registered, we’ll give you all the information you need to become a successful private lender.

Clearly, there are many benefits to becoming a private lender. Investing in private money loans give you better returns and is a secure process. It’s also low risk if you do all the right things and approach it the right way. As an investor, it makes sense to become a private lender in today’s economy because private money lending offers a safer way for you to generate income compared to other forms of investment. Investing in private money loans is ideal if you’re looking for an easy and cost-effective way to increase your wealth.

Finance companies provide much needed funds to Australian Businesses

Private finance companies have become an important lifeline for small and medium businesses in Australia. When banks and financial institutions have squeezed their credit lines, private funds have become competitive players in the industry. Since private funds mostly provide secured lending to businesses, their loan screening is less encumbrance. The rate of interest offered by private finance companies is also attractive and hovers around 1% to 1.5% per month. There are several other benefits of obtaining loans from private finance companies. Fast processing time, lower eligibility criterion and flexible terms and conditions are some of them. Loans can be taken for leasing and equipment finance, operational expenses or for business expansion. Loans can also be used for mergers and acquisitions. Most of the private finance companies have strong financial backing and raise funds on a continuous basis thereby maintaining a healthy loan book and adequate reserve funds.

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Home Equity

Business finance is a constant requirement for any business and without adequate cash flow a business can run into trouble. In such a scenario taking advantage of your home equity with a home equity loan can be a good idea. Leveraging the equity of your home to generate cash flow in difficult times often proves to be the best option since home equity loans have competitive interest rates and flexible terms and conditions. Since a home equity loan falls under the category of secured funding, lenders look to the equity when approving the loan provided the property has clear title.  Home equity loans are normally taken for funding operational expenses or capital expenditure. The tenure of a home equity loan is generally for a short to medium term duration. However extending or “rolling over” the loan is common especially when the loan is taken for capital expenditure and the return on investment is a gradual process.

Home Equity

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Your mortgage, Everything you wanted to know

There are several important things that one needs to know before obtaining a mortgage. Your mortgage will have significant impact on your family or business and therefore thorough due diligence has to be done before applying for a mortgage. Some of the most important points that need to be verified are interest rates, repayment period and other terms and conditions. The current variable interest rates in the Australian market hovers up and down all year and is relative to the Reserve Bank’s cash rate. Given the current economic situation, the Australian reserve bank is cutting down on interest rates to boost the economy. Therefore it is good time to look at the interest rate on your mortgage. A fixed mortgage may make better sense as interest rates keep on changing and the economy may come out of the downturn.

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Equity loan to meet your cash requirements for your Business

The need of funds is always of prime importance in running a business. If the cash flow falls below a certain threshold there is always a risk of slowdown in business operations. Whenever cash in bank falls below the benchmark, it is time to pull additional resources and raise the level of cash. There are many ways of doing it and an equity loan from a private funder is a good option. A business owner can get a loan of approximately 60-70% of the equity value of the real estate security. The equity value of a home is calculated as the worth of the home at today’s market value and the amount of money that is owed to mortgage. Generally, the loan amount for an equity loan varies between $20000 to $2000000 depending on the business and the equity loan requirement. Unlocking the equity of your home makes sense in some circumstances because it helps you to raise cash instantly without the need to provide documents and financials to the bank. Though there are several ways in which funds can be raised, an equity loan makes better sense when time in deciding in crucial.

 Equity Loan

An equity loan can be obtained by any business owner. It doesn’t matter what type of business you run. However certain types of businesses require further enquiry more than others. Businesses such as retail, manufacturing, transport and logistics are a few of the common businesses helped with an equity loan. The repayment terms and conditions of an equity loan are similar to any other loan products. There is a fixed time period within which the loan has to be repaid and the monthly repayment amount is fixed at the beginning of the loan term. Generally equity loans are taken for a short to medium time frame ranging from 6 months to 12 months.

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Subprime loans also known as non-conforming loans to buy your dream home

Subprime Loans

A subprime loan is offered by specialized mortgage lenders to buyers who do not fall within the ambit of traditional mortgages. A subprime loan can be offered to people who do not have a very good credit history, self-employed people who do not have tax returns or do not have a good financial history. A subprime loan can also be extended to individuals who have spent less than 6 months in their existing jobs or to new businesses. There is lot of ambiguity on the qualification factor for subprime loans. Banks are not ready to offer subprime loans because of the poor financial health of the applicants. However, private lenders offer loans to these borrowers when they have cash or equity to reduce the loan to value ratio.

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Short term funding to overcome pending business demands

Short Term Funding and quick and fast funding

Short term funding can help business owners to overcome pending business pressures and demands. Short term business loans from private finance companies offer quick and fast funding for borrowers. In this age of cut-throat competition speed is critical. If a loan is not actioned with 24-72 hours the loan importance may lose its relevance. It may not solve the purpose. So what are the options that a business owner has when there is a critical requirement of funds? Does he run to the bank and wait for 14 days to get the loan processed or does he approach a private fund or a wealthy individual to overcome the crisis. Experience shows that the second option is better because the loan will be processed much quicker, with lesser documentation and flexible terms and conditions. Click Here To Read More

Business Loan, Finance your business with the right one

Business Loan

Entrepreneurs and Business owners usually need a business loan or finance their enterprise with the right business loan. A business loan can be short term to medium term arrangements and are tailored to fit the requirement of the business owner. There are several reasons why a business owner may need to obtain finance i.e for operational expenses, capital expenditure, organic growth and the list goes on. The basic requirement of a business loan should be easy repayment terms and no hidden charges. Typically the loan should be processed within 24-72 hours after the documents have been submitted. If the loan is required to start a business there are certain factors that need to be considered before applying for the loan. The business owner should ideally have security available for a loan of 60%-70% of the value. This is a benchmark that is followed by banks and financial institutions in Australia. There are many private funds that are ready to finance your business at this time. If time is of paramount importance then applying for business finance with a private fund makes more sense.
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Your mortgage from a credible Mortgage provider

Your Mortgage is important

There are thousands of mortgage providers in Australia but when it comes to choosing one there is always a tough dilemma. Your mortgage does not always need to be a dilemma. Choosing a mortgage provider depends upon the rate of interest offered by the provider, mortgage terms and several other factors which can have an effect on the overall re-payments to be made over life of the loan. The rate of interest on mortgages can vary greatly depending upon the mortgage provider and the purpose of the funds. A private fund that offers mortgages may have a higher rate of interest than banks. However with a private mortgage provider, the process will be simpler and the time required for completing the transaction will be less. Private funders also offer flexible terms and conditions for loan repayment. Click Here To Read More