Ways To Reduce Risk
Most private lenders are afraid of two things: 1) losing the money, and 2) damaging the relationship. Virgin Money helps you avoid both outcomes:
By using a promissory note to formalize the deal. The best way to protect your personal relationship is to create a promissory note where the financial terms are spelled out in detail. That way, expectations are clear to both parties and there is no risk of miscommunication or mistaken assumptions. Moreover, having a legal document in place helps both parties take the agreement more seriously.
By allowing your borrower to pay over time. Often, informal loans between individuals are expected to be repaid in a lump sum when the borrower gets around to it, or when the lender insists. The uncertainty of this approach spells trouble for both. Research shows that default rates on private loans drop from 14% to less than 5% when a repayment installment plan is used instead of a lump sum payment. Monthly payments are habit-forming and allow the borrower to repay in bite-size pieces, increasing the chance of successful repayment.
By using electronic funds transfers (EFT). EFT removes human error and forgetfulness from the equation. Experience shows that loans paid back electronically are more likely to be paid back on time. There's no "the check's in the mail!" for you to hear or your borrower to fall back on. If funds are insufficient, you will know within a few business days.
By helping the borrowers get back on track. If a Non-Sufficient Funds (NSF) error occurs, friendly and experienced staff follow-up with the borrower by email and phone to resolve payment problems. We've seen a lot, and can help your borrower get back on track with the current payment schedule, or change to a schedule (with your approval) that's more affordable.
By handling all communications about the loan. Whether it's tracking down a new address, preparing a year-end statement or resolving a payment problem, we handle the business of the loan so you can keep it separate from your personal relationship. There are few things more unpleasant than having to discuss a private loan (especially one gone awry) at a family gathering.