Whenever a financial problem arises, it is very common for real estate investors as well as business owners to turn to non-traditional lenders to ask for assistance when it comes to their expenses for property purchases and other business operations. These alternative loans are really a better option for businessmen who need the money immediately since these loans have fewer restrictions and therefore shortening the time of its release and the interest rate can also be lowered depending if the loan is secured or not. Be that as it may, business owners are still unable to see the distinction between these private money lenders and hard money lenders.
How Can You Differentiate Private Money with Hard Money?
Although both of these loans are able to aid in financing the business proprietors with their financial needs, they also have to set a time for their method of payment. Although there are still things that differ about these two loans. If you are able to understand the different factors between these loans, then you will be able to choose the right financial product that will help you best with your needs.
Basic Things You Need to Know about Hard Money Lending
Businesses who offer alternative lending are the ones offering hard money loans. Hard money loans are financed by private sources but the lenders are still managed and their area of expertise revolve around real estate investors, business owners and private borrowers. Hard money lenders as well as private money lenders base their lending decisions on how the borrower is able to secure the money that they have borrowed by providing a certain percentage to the lender instead of having to depend on their credit scores.
Still, hard money lenders have loan terms and a list of criteria that needs to be followed before lending money. Even if they work with borrowers who are not able to finance themselves, they are still not into extensive negotiation regarding the method of payment. On behalf of their private sources, the lenders follow the standard formulas of the industry in the making of repayment plans and interest rates so that they can provide fair terms to their clients while still being able to gain a lot of profit.
What is private Money Lending?
Based on the name of the loan, private money loans are loans provided by private lenders. Private money loans are considered as secret loans since other people do not have to know about the loan and the lender does not have to advertise that he or she is lending some money. Terms and loan rates in the lending industry does not have to be followed by these private money lenders since they are not controlled by anybody.
These private money lenders can also have a different set of approval criteria. There is also a limitation for borrowers with regard to these private money lenders since they are not obliged to follow the set of criteria in the lending industry.