Private lending is an old business indeed. Long before banks, finance companies, trust companies and credit card companies, individuals borrowed money from one another in exchange for interest payment.

Many times the loans were secured by personal assets like chattels (personal effects) or real property (land or building); other times, the money was loaned without security, on the strength of a person’s reputation and good standing in society.

Modern day private lending is simply a continuation of the old practice: an individual with surplus money, will loan some to another individual. The loan is based upon the expectation that the monies will be repaid in an agreed manner, with interest.

When a person loans money to another, they are investing in the borrower. The interest rate at which the loan is set, is equivalent to the return which the lender expects to get from his or her investment. Many lenders will invest in private loans because the returns they generate are greater than what they can earn from investing money elsewhere.

Private lending is not without risk. The risk that a borrower does not pay back a loan is very real; however this is offset by doing a background check on the borrower to make sure that they have the character to want to pay back the loan, the income capacity to be able to make the monthly payments, the good credit history to show they have met previous credit obligations successfully and the collateral to secure the loan - just in case something wrong happens. If the borrower cannot satisfy any of the preceding four conditions, you may end up investing your hard earned money into a headache.

What type of private lending do you want do?
  secured lending
  unsecured lending
  personal lending
  commercial lending
  short term lending
  long term lending
  combination of any of the above

What experience do you have as a private lender?
What gave you the idea to become a private lender?
Do you have friends who are private lenders?
       If so, have you asked them for advice?
How tolerant are you with losing your money?
Do you somewhere else to invest your money, instead of private loans?
If you do have elsewhere to invest your money, why do you choose to be a private lender?