Hard Money Vs Private Money
When speaking of hard money and private money people tend to get confused. The major confusion lies in the biggest similarity: both are asset based loans, based on the value of the property being purchased and not financial credentials of the borrower. The next biggest similarity is the disassociation from banks or national lenders.
Hard money lenders are licensed to loan money, whereas private lenders do not require any type of licensing. Private lenders include friends, family, professional referral, or business associates; anyone can be a private lender.
Hard money is much safer than a private loan since there must be lending criteria involved in hard money loans. These loans have various terms defined such as: duration, interest rate, and upfront points. These factors are defined and agreed upon before the money is issued and all hard money lenders are likely to use different terms to attract borrowers who have specific needs.
The downside (but possible upside) of private loans is there are fewer (if any) defined terms before the money is issued. The terms are usually up to negotiation and can, in theory, change as time progresses. The terms can be discussed to obtain more money, better interest rates, and sometimes simpler terms in general. This can lead to private money loans ending up as the cheaper option, but not always.
Hard money lenders usually utilize private sources for their funding, requiring a markup on the interest rates to make a profit whereas private loans, in a sense, are removing the third party and getting the money straight from the private source to the borrower.
One of the biggest bonuses to using hard money is the ease of access. Private money can be harder to find due to lack of advertising whereas hard money lenders focus on that business specifically. Since private lenders may only provide lending services on the side or when requested, it can be difficult to track down, meaning hard money loans will save borrowers time (and in a sense, money) by needing less searching and fewer hours spent negotiating.
If you’re seeking a private money loan, they are out there and can be an alternative to hard money loans when seeking real estate deals, but always keep in mind that companies like My Rehab Lender are here to help you with your funding needs. Our rates are reasonable and our service is quick and easy so you can get on with your life quicker.