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Private Party Loans

Basics of Private Party Loans


Private party loans are loans between individuals. Instead of using a bank or finance company, you agree on loan terms and work together. Some private party loans are a great deal for all involved, with better terms than the bank offers. Sometimes, private party loans are the only option for borrowers with bad credit.

Uses of Private Party Loans

Where can you use a private party loan? Just about anywhere. The bank is always an option, but you should check out alternatives. Private party loans have been used for auto loans, but they’re also useful for home loans, personal loans, business funding, and more.

Sometimes private party loans create a win-win situation: great for lenders (who earn more than they can at the bank) and borrowers (who pay less interest than they would at the bank). When borrowers have poor credit, private party loans may be the only option available, although they may come with higher rates.

Where to Borrow

There are basically two ways to find private party loans: peer to peer lending services and people you know. To borrow from strangers, visit a peer to peer lending site and apply for a loan. Even if you set up a private party loan with somebody you know, these sites may help with loan documentation and servicing.


Documentation is a key to any private party loan. Make sure everything is spelled out in writing, and everybody understands and agrees. While it may seem overly formal, documentation can prevent headaches and heartbreaks in the future.

To document your private party loan, write an agreement or use somebody else’s. For larger loans, it’s probably best to use a professionally prepared agreement - a lot can go wrong, and good loan agreements anticipate pitfalls.

For private party loan documents, search the web, work with a local attorney, or use a peer to peer lending service. For example, Virgin Money sells agreements and even processes payments on mortgages and other private party loans.

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