Bryan R. Ziegenfuse, Managing Partner in a Direct Lender, Shares the Basics of Private Lending Loans
If you are considering a private lending money loan or just want to know what they are all about, Bryan Ziegenfuse is here to help.
Bryan R. Ziegenfuse is the managing partner indirect lender I Fund Philly, which focuses on real estate lending.
He has had a diversified career for more than 15 years as an executive across the lending, capital markets, finance, and portfolio management disciplines.
Without further ado, here are the top things to know about private lending loans, according to Bryan Ziegenfuse.
What is the definition of a private lending loan?
A private lending loan is usually used in real estate actions, Bryan R. Ziegenfuse said. The collateral for the loan is the property being purchased, not the buyers’ credit.
Who gives a private lending loan?
Private lending loans are not made by traditional lenders, such as banks, according to Bryan Ziegenfuse. The lenders are typically private individuals or companies that find value in a private lending loan.
Because private lending loans are riskier than traditional loans from banks or government lending, the cost to the borrower is typically higher.
What are the benefits of a private lending loan?
You may be wondering if the cost is higher and a bank won’t give it, what is the use of a private lending loan? Bryan R. Ziegenfuse said a private lending loan provides faster access to the money because the approval process is not as lengthy. Additionally, it can be a good option for those with poor credit, since a person’s creditworthiness is not considered in the private lending approval process.
For example, people might use a private lending loan to stop a house from being foreclosed on, Bryan Ziegenfuse said. The money can be issued rapidly, the approval process is quick, repayment options are flexible and the equity in the property is used as collateral.
What are the negative aspects of a private lending loan?
On the other side of the coin, there are potential disadvantages to a private lending loan, Bryan R. Ziegenfuse pointed out. For one thing, the interest rates on a private lending loan are higher than the more traditional loan interest rates, Bryan Ziegenfuse said.
Part of this is because short term interest rates are nearly always higher than long term rates. However, private lending loans can have an interest rate that is higher still. Another potential downside to private lending loans is that they often have a lower loan-to-value ratio than a traditional loan. These are good aspects to be aware of before jumping into a loan, Bryan R. Ziegenfuse advised.