Private money loans – or simply “private money” – is a term used to describe a loan that is given to an individual or company by a private organization (source).
What is collateral?
Collateral can be used in these types of ‘private money’ loans to ensure a borrower will pay their loan back. These pieces of collateral are often homes, cars, valuables/collectables, investments, etc…however, Colonial Capital only focuses on real estate as collateral.
Why borrow using collateral?
Borrowing with collateral typically ups one’s chance of securing a larger loan because it allows the lender to sign on with less risk; this is because the lender can take said collateral asset and sell if the borrower is unable to pay the loan back.
There are a few reasons a lender might request the borrower ‘put up’ collateral. One example could be if a borrower has either a short or unsteady credit history, they might be asked to bolster their credibility by putting up collateral. Knowing Colonial only focuses on real estate as collateral (as opposed to a car), we might then ask a borrower to put up a second asset or a second position deed of trust on an investment property.
Collateral, a win-win?
In the long run, lending on collateralized assets could bring positives to both parties; for the lender, it makes them feel more secured that they’ll eventually be paid back. For the borrower, it allows them access to financing, more attractive loan terms, and builds their credit.
|As a direct lender, Colonial Capital offers asset-backed short-term bridge financing. We take care of all aspects of the loan process internally to give you a hassle-free experience when in need of emergency funds. With over 75 years of experience in banking, finance and real estate investments, we can help you get started on projects that matter.