Private Lending: The Downsides of Faster Approval

Before you append your signature on any short term loan application from a private lender, you should bring yourself up to speed with the fact that fast cash is expensive cash. If you have never given it a keen thought, here are the downsides of faster approval, and why you should be very cautious when approaching private lenders for these types of financing:

The interest rates are higher than average

Of course you are aware that the interest rates on these loans are high, but do you know by how much? You will be surprised to know that with most of faster approval loans, the interest rates can be as high as 80% APR. Take great caution of the interest rates and be sure that you have a solid plan to take care of them at by the time repayment is required.

Some repayments are due weekly or even daily

Don’t be surprised if you will be asked to make the loan repayments on a weekly, if not a daily basis. This is because these loans must be repaid in a couple of months and a majority of lenders will require that you start repaying the loans almost immediately. It can be an inconvenient situation if you are strapped for cash to make daily repayments.

Your access to other financing may be limited

It is possible to have limited access to other forms of debt financing for your business during the duration of the short-term loan. This can potentially work against you if you had any plans of applying for a bigger loan in the near future. Therefore, if you need the loan for your business, carefully evaluate your priorities and determine if the fast cash you desire will be worth the potential limitations you may encounter regarding your future plans.