If there is one good thing that is coming out of our current pandemic, it is that people are coming together and helping each other. In times of crisis, we really do get to see the best of human nature. Of course, there are always a few bad apples, but we won't give them any air time. Overall, people do stretch their humanitarian muscles when times are bad. Just think of 9/11 and how we all pulled together and made America stronger.
We are in a time of crisis, there is no getting around it. Not only a medical/health crisis, but since so many people have lost their jobs and businesses have been forced to close their doors, we are definitely in a financial crisis.
So what do private lenders think about this current situation and how are they handling it with respect to their businesses? This article from the LA Times does a great job of revealing how private lenders feel about what is happening and what they are doing to remain flexible. As the article points out, many lenders are stepping up, announcing measures, or the possibility of measures, to ease people’s financial burdens and help them through this extraordinary event.
“We are in unprecedented times,” said Robert Broeksmit, chief executive of the Mortgage Bankers Assn. “Borrowers are facing hard economic times through no fault of their own.” Andrew Winton, a finance professor at the University of Minnesota, said many consumers’ financial futures depend almost entirely on how much flexibility creditors are now prepared to show. “It could get ugly,” he said.
As a private lender who has borrowers with payments due, now is a great time to show your goodwill by having forbearance. Forbearance, as it applies to loans, is most often used in the case of student loans, a postponement of payments. As a private lender, if you are in a position to do so, apply forbearance to borrowers who request it, within reason. Maybe you are going to allow one or two skipped loan payments, or put off current loan payments that are due to the end of the note.
Private lending will turn very personal versus transactional,” said Eddie Wilson, CEO of the American Assn. of Private Lenders. “Each deal is looked at individually.” Another way to show forbearance is to follow the lead of other lenders who have said they won’t report missed payments to credit agencies during the pandemic.
However, there is a fine line between altruism and losing your shirt. Being smart during these trying times means protecting your assets. You too may be going through financial hardships, as your source of capital, such as investors, are more hesitant to lend even you the money you need to keep your private lending business in the black. All of this is happening at a time when you may be receiving far more requests for loans from people who are out of work or their business has been forced to close and they need money quickly. Hopefully, the U.S. Economic Stimulus Package will help alleviate the burden for many Americans.
None of us knows what the future holds, but during times of crisis, a Rule of Thumb is to be kind, first to ourselves and then to others. Remember why you became a private lender in the first place, to help people. Of course, your second motivation was to be successful. By keeping your head, applying forbearance with borrowers when you are able, and taking time to truly check out potential borrowers when it comes to new loans, your private lending business should actually flourish in the long run.
As a way to vet new borrowers, we suggest you try out the best PDF financial file converters on the market. Using the MoneyThumb tools specifically designed for lenders will allow you to make smarter and quicker lending decisions. That's one less headache you need to deal with during these trying times.
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