Published On: Thu, Jun 25th, 2015

What to do when the bank denies your loan

If the bank just denied your loan application, don’t fret just yet. With all the paperwork, credit checks and restrictions borrowers have to go through, getting a loan nowadays feels like high school all over again – the cool kids get all the attention while the geeks get mud in the face.

Private Money

It’s not like these financial institutions love to make desperate folks in need of a little financial aid hop on one leg and beg to be approved. Banks are in the business of making money, despite all the fluffy commercials you see on TV of bankers and customers smiling and being best pals. That’s pure fiction. So if they have nothing to gain from you and your credit scores are crap, sorry mate. Better luck next time.

Private Money

If you happen to have a so-so credit rating bordering on bad with no collateral, you’ll be denied ten times out of ten, even if you prove that you have the capacity to pay. What now? Well, for starters, banks aren’t the only players in town. There are other ways to get money when you need it. Not the Mafia or some loan shark who doubles as a bookie. You don’t want to go that route.

An alternative to going to a traditional bank is going to a private lender. Also known in financial circles are “private money”, private lenders can be a private individual or an organization that lends money without the usual paperwork and credit checks that banks have.

You should also note that private lenders are more aggressive when it comes to collections, because unlike banks that have very deep pockets, private lenders work with limited cash flow and need to see a return on their investment faster. That’s why interest rates are higher and loans should be paid in a shorter amount of time. Private lenders just can’t sit around and wait for you pay them back in 30 years. The most would be about two years, but that’s it.

First, do your research

Before getting into an agreement with a private lender, you absolutely have to practice due diligence and conduct some research on who they are. The lender has to be legit, professional and a member in good standing of the private lender’s association in your area. Look for red flags, such as the lack of a proper office, an unsecure website (should be https) and no information on payment terms and schedules.

As a customer, you need information on whatever loan you choose to get, and if they’re transparent and not hiding anything, it should be available to you on their website. If you ask their rep and still don’t get an answer, move on to the next lender on your list. There are a lot of respectable lenders, but in the money game, there are always going to be sharks waiting for fresh meat.

Final Word

If you’re looking for a private lender in Montreal, Las Vegas or New Jersey, don’t worry – there’s a bunch of them in every major city. Again, load up on your reading and find out about the private lender’s association for the city you’re in and check their members. Choose one that has verifiable testimonials and isn’t flagged in any forum as a scam.

Chances are, you’ll get one that is reputable and legit, as long as you follow the guidelines for not getting scammed. If you still don’t want to give up on traditional banking, there’s no harm in trying. Just learn from every “no” you get and work from there. Who knows, maybe you’ll get lucky.