You may not know it, but you may be surrounded by private money lenders galore. Private lenders can literally take any form and shape, and we are only talking about the people you know. If your grandmother gives you a loan of $10 for your Saturday excursion, then your grandmother is a private money lender. If your parents loan you enough money to buy half a car, then your parents are private money lenders too. If your best friend asks for a fiver for lunch and promises to give it back to you at the end of the day then (what do you know?) you are a private money lender as well.
Private lenders can be such. These can be a single person or a group of people who are not associated in any way with any financial institutions, but are willing to spare dough when they do have a bit of dough to share. Most private money lenders of this kind often offer unsecured loans. This means that you do not have to offer any form of collateral to get your loans. However, if you know your family and friends well, then you know that these loans are quite lenient when it comes to payment schemes – and collateral does not have to mean a physical object or an item of value.
After all, if your grandmother decides not to collect the loan anymore, in favor of you mowing her lawn for 3 months every Wednesday, then that is a repayment scheme offered in service. If your parents decide to let you pay off half of what you owe in kind (straight A’s until you graduate from high school,) and the other half in cash when you graduate from college, then that is also a unique form of repayment scheme. The former can be considered as collateral, and the latter is an extension of the maturity date for your loan. Also, if your friend begs to repay your fiver next week, and offers the use of his newest Guitar Hero game in the meantime, then you are basically accepting collateral from your friend.
On a broader note, there are private individuals who are also not affiliated in any way with financial institutions whom you can approach for loans. A very good example of this would be a private lender who offers you a student loan to get you to tide you over in college. This private lender can be an anonymous sponsor, or someone whom your family knows, who is willing to stake several thousands of dollars for you to finish your degree. Repayment schemes can be worked out between you and the private lender, and these can also be in cash or kind. If your benefactor decides that you should work for his or her business when you finish your degree (or while you are still in the university,) then this is a repayment scheme in kind.
Another example of a private money lender is a person who decides to invest a bit of dough to help you launch your small business. Investing in a promising business can be very attractive to a private money lender. In addition to you paying off the actual capital, your lender’s interest rate may be converted to stocks in your company, or even several samples of your actual products.