Private Lending Overview
Private Lenders, also known as hard money lenders are usually individuals who possess a large amount of capital in their hands. Most of these lenders hail from a family which has been in the informal lending business for decades with bundles of loan books which date back to several generations. Supreme Private Lending Software for private lenders, hard-money lenders, & informal lenders, who want to optimize their loan portfolio & make it efficient.
Traditional Institutions vs Private Lenders
Though traditional institutions like banks offer loan at a lower rate, the time taken for the loans to process is way too high, and the process is rather rigorous. Traditional Financial Institutions such as Banks, NBFCs etc.. tend to take a closer look at 3 C’s (Credit, Capacity, and Collateral) of the borrower when they evaluate a loan application.
Most of the times, the borrowers don’t meet the stringent standards set by them such as high credit score standards, immaculate borrowing history, and an adequate debt-to-income ratio. So, irrespective of offering an adequate collateral their loan application gets rejected. Such instances make private loans a win-win situation for the parties involved because the borrower could get the much-needed money whereas the lender gets an opportunity to yield higher returns.
Private lenders don’t usually bother much with the prior credit history of the borrower provided that he/she has the income to repay the loan or a satisfactory collateral to pledge against the borrowed amount. However, private loans are more or less a double-edged sword. Though they offer a near instant loan, the stakes like interest rate and the hard collection tactics raise the bar way too high which is the reason why a lot of people tend to use this option as a last resort.
The Loan Process
Private lenders usually offer two type of loans: Loans Secured by Collateral, and Unsecured Loans. As opposed to normal traditional loans, these private lenders offer loans only under the security of a promissory note or a deed of trust to ensure proper repayment.
The promissory note or loan agreement usually offers the lender a security of sorts by giving them the power of attorney to control and own the pledged item or property until the borrower repays the borrowed amount.
With a deed of trust accompanied by a promissory note or loan agreements, the borrower provides the lenders with a means to use their properties such as lands, home, vehicles etc.. as collaterals to secure the obligations to repay.
These Promissory Notes or Loan Agreements clearly gives away the terms under which a loan is obtained and the other important factors such as repayment date, interest rate, the collateral used, the power to control it, clauses to prevent delinquencies and the action to be taken on the non-performing asset in case a borrower defaults.
More often than not, the legal ownership of the pledged collateral is transferred to the private lender or a trusted third party until the borrower closes the loan by repaying it completely. In the intermediate time, the lender holds the authority to control and use the property as they wish. If a borrower happens to default, the lender is free to sell the property and retrieve the outstanding payment.
Challenges faced by Private Lenders
While it may seem like the lenders have the better part of the deal by charging outrageous interest rates and making the borrowers comply with acrimonious norms, the lenders do face a lot of roadblocks and hiccups throughout the lifecycle of a loan. Here are a few most common issues faced by private money lender:
Majority of the private lender’s are not really interested in investing much in IT infrastructure and rather prefer to keep their loan processing primarily paper-based making it a tedious task to maintain bulks of paperwork which makes the process of retrieving critical information and keeping track of a loan’s status a time-consuming job. In addition to that, paper files have more probability for permanent data loss in case of natural calamities like fire and flood.
While traditional institutions have completely automated their workflow and back-end operations, the private lenders are still way too backward when it comes to adapting to technological advancements. As a result, they resort to either using excel sheets or just manual accounting which may cause way too many errors that might be very tricky to correct leading them to potential accounting, legal and even compliance risks.
Tracking and Servicing Loans:
Keeping track of a loan’s performance could be quite complicated when the repayments are recorded manually. Since the process is prone to manual mistakes, there is no way to verify the authenticity of a borrower’s claim of repayment if the lenders forget to make a note of the transactions, which could cause turbulence in the lending relationship.
Excel sheets and Manual paperwork might demand us to invest quite a lot of time to locate and retrieve the exact file which contains the record and a particular customer. Since the records are mostly offline, keeping track of delinquencies in repayments could be difficult. So, the lack of immediate attention to irregularities might cost the lender a considerable amount to a retrieve the outstanding loan from a defaulted customer.
All these challenges can be overcome by private lending software like CloudBankIN, which is a prominent loan software used by top lending institutions around the world.
CloudBankIN - Outstanding Private Lending Software in the Industry
CloudBankIN is most trusted private lending software used by major Banking Institutions to In-house Financing Agencies and Individual Lenders. CloudBankIN is the optimal solution for Private lenders who are striving to scale up their lending activities and expand their loan portfolio by streamlining their loan process.
Our powerful private lending software will completely automate the manual calculations eliminating the errors. The cloud-based nature of the software eases down the retrieval of information and helps the lenders to keep track of each loan account in an efficient manner.
CloudBankIN is the right choice to get sophisticated private lending software which would help small to mid-size lenders to keep more of their capital out in the field by using this top-end private lending software make smart approval and pricing decisions.
End-to-End Loan Automation
360-degree Portfolio View
Data Driven Approach
Loan Lifecycle Management
CloudBankIN is a tailor-made lending software for private institutions which would help them automate the complete loan origination phase from building a portfolio, creating loan accounts, importing borrower data from excel, and even seamlessly integrating credit rating agency interfaces within the banking suite for a swift credit risk analysis.
- Effortless Import from Excel Sheets
- Swift Credit Analysis
- Lightning Fast Process
- Paper-free Processing
CloudBankIN is a complete loan management system which would help them customize the loan products to fit each customer’s need and configure every aspect of it like the interest rate, the payment period, amortization schedule, set a specific grace period and late payment fees (if any). In addition to managing a record of loan information, the lenders also get an option to save a copy of the relevant loan documents on the cloud database and retrieve it at a moment’s notice.
- Automated EMI Schedule
- Customizable Loan Products
- Configurable Interest Rates
- Powerful Document Management
CloudBankIN simplifies the collection process of private lenders with its intuitive mobile app and cloud-based nature which immediately updates every transaction in a loan process from the date of disbursement to every individual repayment. The transparent nature of the software lets them closely monitor any delinquencies in repayment keeping track of any potential defaults.
- Automated Collection Records
- Sturdy Delinquency Tracker
- Instantaneous Payment Updates with ECS (Electronic Collection System)
Our powerful private lending software comes with a built-in accounting management system which has an extensive list of accounting functionalities from automated journal entries to chart of accounts and automatic computation of taxes. Each successful repayment is mapped to reflect instantly on the balance sheet and income statement.
- Configurable Accounting Rules
- Accrual & Cash-Based Double Entry Accounting
- Customizable Frequent Posting
Our intelligent reporting engine has a wide range of ad-hoc reports (100+ ready-to-use) which could be used to derive in-depth insights from the available data in a matter of seconds to make informed decisions and keep track of key performance indicators.
- 100+ Conventional Reports (Income Statement, P&L Statement, Total Loan Disbursed, Outstanding Loans, Active Borrowers, Non-Performing Assets, etc.)
- 6 Specific Categories (Borrowers, Loans, Savings, Funds, Accounting and XBRL)
- 4 Different Formats (XML, PDF, XBLR, and CSV)
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