Private Lending vs Bank Lending

You need access to financing.

But you’re confused about private lending vs bank lending.

So, which is better for you or your business? Do you go for a loan from your bank or a private lender?

Before deciding on which lending method works best for you or your business, it’s essential to understand the difference between bank lending and private lending.

Let’s get started.

What is a private lender?

A private lender is an individual or company that loans money.

The individual or company is not a bank.

It means borrowing money from individual investors. For example, real estate investors use private money lenders to finance projects that either don’t qualify for a traditional loan or can’t wait for the usual 30 days that a traditional mortgage lender requires for approval.

The money is secured by property with the objective of real estate financing.

Private money lenders are more relationship-based than bank lenders.

Are private lenders better than banks?

Banks charge lower interest rates than private lenders because private lenders get funds from investors looking for a decent return.

Private lenders can also get funds from other banks and financial institutions and can be flexible in funding a deal.

While each of these methods is viable, any investor should know the difference between them.

Banks are traditionally less expensive, but they are harder to get approvals for.

Private lenders, on the other hand, are more flexible and responsive.

Let’s look at it in detail.

What interest rates do private lenders charge?

Private lenders often charge slightly higher interest rates compared to banks.

However, banks are subject to strict government regulations which often dictate the kinds of borrowers and businesses they can lend to and how borrower profiles should look like.

It means banks are less flexible, and the approval process is slower because of the stringent due diligence requirements.

While private lenders are still subject to government laws, they are significantly less regulated. It means they are more flexible in their type of lending and borrower profiles.

Private lenders use a more common-sense approach to understanding issues and overcoming them.

They are more creative and investigative in qualifying borrowers and may be willing to overlook some background flaws upon valid explanation.

It means loan options are more customizable to your needs.

Do private money lenders check credit?

Unlike bank lenders, private money lenders hardly check borrowers’ credit scores. However, that doesn’t mean they don’t check at all before lending. Instead, they base their decision primarily on the asset at hand.

That said, some private lenders would also like to know who they’re lending to, and checking your credit score is one way they carry out their due diligence.

Although, not all private lenders check borrowers’ credit scores, only the more diligent lenders do.

What if you don’t have a credit or have bad credit?

Can you get a private loan with bad credit?

You have two options for a private loan if you have bad credit or no credit.

Get a private loan from the few private lenders that don’t have the credit or cosigner requirements. We at Freedom Capital assess mortgage applications by examining your equity and overall financial picture. While credit can be a part of this picture, it is not the whole story to us. We understand that you have previously dealt with financial issues, but that you have now moved beyond them.

If you are still having financial difficulties, it is still possible to acquire financing but you may have slightly higher premiums as you have a more high-risk situation.

Alternatively, get a private loan with a co-signer who has good credit.

Always discuss this challenge with your private lender.

Where can I find private money lenders?

Do you need access to immediate funds to make a new purchase, manage cashflow, or to invest in your business?

Has the bank declined your application because you have bad credit, you’re over-leveraged, or you are self-employed?

Don’t let the bank bureaucracy kill your dreams.

Freedom Capital private lending caters to individual borrower’s needs.

We make it easy and fast for you to access funding, even in the most challenging situations, while providing sound advice every step of the way.

How can I get a private loan as an investor?

While there are many private lenders out there, funding your project can still be a challenge.

If you want to speed up the process and pay lower premiums, then you’ll have to prepare and have the right mindset.

Here are some basics:

Understand private lending

You’ll need to do your due diligence and understand the facts about your project or purchase.

Facts include the security of the investment, and if it is well researched and achievable? What are the risks involved? Etc.

Lenders pay attention to the amount of equity you have invested in the property.

  1. Network and build strong relationships 

Relationship building is essential in private lending. You should trust the lender you choose and be comfortable working with them.

If you’re getting started in real estate investment, then you’ll need to make connections with every professional role in the industry such as agents, investors, attorneys, and private lenders.

  1. Make a persuasive presentation to share during your pitch.

If you’re reaching out to individual private lenders/investors directly, then you’ll need a strong presentation to separate you from your competition.

In your presentation, include your company overview, such as your education, past deals, goals, and what makes your deal the best.

You may include videos that outline previous projects you have worked with and successes.

Also, prepare for any questions that may come your way during the pitch.

Remember, the main objective here is to demonstrate that your project is low-risk and to create a good impression while highlighting your strengths.

  1. Identify the right lender for your business.

Pitching individual lenders is hard work, so you want to make sure you choose the right investor.

First, ask them about their loan terms, interest rates, and fees.

It will help you figure out how long it will take you to pay the loan back and how quickly it accrues.

Do they charge fees upfront or charge in the form of penalties? What’s the disbursement schedule? These are some areas you should seek clarification on.

Based on this information, you should choose a private lender that is the best fit for your project.

  1. Wow the investor with your pitch.

Closing a deal with a private lender goes beyond explaining the numbers.

You need to wow them with your pitch, put them at ease, and make sure both of you are on the same page.

In establishing a good rapport, initial pitching should be focused on educating a potential investor about the project and demonstrating your commitment to it.

Keep building the relationship step by step and focus on answering any questions or objections that come up.


How Freedom Capital can help you acquire financing.

Freedom Capital deals with over 50 institutional & private lenders. These include pension funds, life insurance companies, private investors, banks and trust companies, credit unions, pension funds, and life insurance companies.

With our extensive network of lenders, we can help you secure an approval for a private financing loan in as little as 48 hours. Our expertise allows us to obtain a lower rate and better terms for you than if you do the full process on your own. Apply or call us today at


Private Lending Summary

When working with private lenders, your goal shouldn’t solely focus on landing a deal and moving on.

Instead, seek a private lender you can present deals to on a long-term basis.

It means building a healthy relationship, where you can secure financing for both current and future investments.

Be professional in your networking, build a strong portfolio, and make great pitches to each lender you work with.

If you would like our help, you’ll always have options anytime you need a private loan.




Do you have bad credit, low income, over-leveraged, or looking for solutions outside the conventional lending box? Are you tired of the bank bureaucracy, politics or games? With the marketplace changing and the bank’s rules becoming more stringent, it is extremely difficult working with the traditional banking solutions and it is not for everyone.

Whatever the case there is an alternative here for you!