Major differences between Private money vs Hard money Loans
There’s more to Private money vs Hard money loans than simply the prospect of buying a home with bad credit. It’s a good idea to understand how these two types of mortgage lending differ. This is especially the case when you compare them to more traditional lending options like bank loans. These loans are perfect for people with bad credit scores interested in getting a home loan to take advantage of a fix and flip or other real estate investment opportunities. Private money and hard money lenders don’t care too much about your credit score. They’re more interested in whether or not you have sufficient capital to make a down payment. Lenders generally require a down payment of 25-35% of the purchase price of the property.
Hard money loans
Private investors or companies issue hard money loans. This type of financing is a specific type of asset-based loan. Furthermore, these lenders make it their business to determine whether or not you’re a good candidate for the services they offer.
Private money loans
Private money lenders for real estate investing are non-institutional individuals or a company that gives loans to borrowers. These lenders are just what their name suggests private. They could be a business associate, family member, friend, or maybe just a professional referral.
- Hard money mortgage lenders and private money lenders for real estate investing are dependent on the value of the real estate pledged as collateral so they are asset-based loans.
- They both form the bulk of traditional lending sources.
- The real estate collateral backs the loans more than the financial credentials of the person borrowing.
Differences in Private money vs Hard money loans
- The differences between hard money lenders and private money lenders for real estate investing lie in how these lenders organize the structures of the loans and the way the loans work.
- While private money lenders consist of private lenders, hard money lenders form organized businesses and bond in some way.
- Advertising doesn’t necessarily work for private money lenders. Hard money lenders, however, advertise their services. It also makes sense too. They have to promote what they do. Thus, hard money lenders are easier to find than private money lenders. It makes for good business to market what they are offering to the masses. This way, they also don’t need any negotiation skills to secure a loan.
- Unlike private money lenders, hard money lenders have an interest rate, an appropriate duration, and points which are made known to the client before the loan is granted. This is the most important part of a loan when a person is selecting hard money lenders to suit their purposes. Interest rates, loan duration, lending limits, are all open to discussion.
Possibly, from the distinctions above, you will find the best way to get what you want out of your loan. If you still have any doubt about Private money vs Hard money loans, feel free to contact us at (818) 322-5626 or (818) 3CA-Loan today! We will run you through the details of loans and hold your hand throughout the process.