The Advantages of Using a Private Hard Money Lender
Are you looking to invest in real estate?
You may want to consider a private hard money lender for your financing. Private hard money lenders can provide you with the capital you need to purchase or renovate an investment or residential property.
Hard money loans have been around since the 1950s and are an essential alternative to traditional mortgages. That’s because they offer a faster source of funding than traditional banks.
You can get approval in only 24 hours after applying for a hard money loan. This is a great way to avoid the complex bank regulations involved in mortgage processing and close your sale within a few days. Hence, hard money lending is becoming increasingly popular among investors today.
There are many other advantages to using hard money over other types of financing, such as traditional bank loans. Below are nine advantages of using a private hard money lender for your real estate investment:
Who Is a Private Hard Money Lender?
A private hard money lender is an individual who lends money to investors to fund their real estate projects. Private hard money lenders are typically individuals or companies with a high net worth who have a lot of disposable income. They are usually not associated with banks or other traditional financial institutions.
A private hard money lender can set their lending criteria, which can be more flexible than a bank. They are also not subject to the same regulations as banks so that they can lend money to investors with less-than-perfect credit.
Below are some of the advantages of using a private hard money lender to finance your project:
Quick Approval and Quick Financing
A private hard money lender is a great source for quick approval and financing. In most cases, you can get approved for a loan within 24 hours. This means you can have the funds in your account within 72 hours.
This is much faster than going through a traditional bank or credit union, which can take weeks or even months to approve a loan. Traditional financing options often require a lot of paperwork and documentation. They also have strict guidelines that can make getting approved for a loan difficult.
Because asset-based loans offer a quick approval process, you can move forward with your project much faster. Hence, you won’t miss out on a great investment opportunity because of a slow approval process.
Local lending is another great advantage you can enjoy when working with private hard money lenders. This means that they understand the market in your area and can offer custom lending solutions based on your needs. For example, if you’re looking to buy a fixer-upper in a particular neighborhood, they can design a loan that meets your needs.
And because these lenders are local, you can always meet with them in person to discuss your loan options. This is beneficial because you can better understand the terms of your loan and what type of collateral they will require.
In-person meetings can also help you create rapport and build a relationship with your lender. You can take advantage of such a relationship in the future if you need additional funding for another project.
If you’re planning to buy a property and build on it, you’ll need a pre-construction advance. This money helps pay for the land, materials, and other costs of building a new home or commercial space.
Typically, you would get this money from a bank or other financial institutions. But if you’re looking for a local lending option with more flexible terms, you should consider using a private hard money lender.
Private lenders will give you the funds you need to start your project before it’s completed. This can be helpful if you need to buy materials or pay for other costs upfront. You will also get the money you need quickly to start your project sooner.
Private Hard Money Lenders Have Few Requirements
Consider using a private hard money lender if you’re looking for a local lending option with fewer loan qualifying requirements. Hard money lenders are typically individuals or small businesses that lend money to investors based on the value of their property, not the borrower’s credit score.
This type of lending can be especially helpful if you’re a new investor with limited experience or if you’re trying to buy a property in a short time frame.
When applying for a hard money loan, below are some qualifying requirements that are typically less stringent than banks:
- Property value and location
- The borrower’s equity in the property
- The borrower’s exit strategy
- The loan amount requested
The lender will consider all the above factors before approving you for the loan. Ensure that you have a clear understanding of the terms and conditions of the loan before signing any documents.
Hard Money Loans Are Short-Term
Hard money lenders often offer short-term loans written for 1-2 years. While you can get a longer-term loan for up to five years, it’s generally the upper limit and rare.
This is beneficial for borrowers because they won’t have to worry about making long-term financial commitments. You can repay your hard money loan when your investment property is sold.
This flexibility makes hard money loans an attractive option for borrowers interested in buying and selling real estate properties. A hard money loan can be a good option if you are working on a tight deadline.
Hard Money Lenders Don’t Care About Your Credit History
Do you have bad credit? No problem! A private hard money lender doesn’t care about your credit history.
While traditional lenders will often deny your loan application if you have bad credit, hard money lenders are more likely to approve your loan. They care about the value of the property you’re using as collateral. If the property is worth enough, they’ll lend you the money you need.
You can use the loan to buy an investment property, fix and flip houses, or even finance your business. Remember that hard money loans come with higher interest rates and shorter repayment terms than traditional ones. In fact, the average interest rate for hard money loans today is 11.25%.
Private Lenders Are Quite Flexible
A private hard money lender will likely be very flexible with repayment terms.
While it’s easy for traditional lenders to foreclose on your property if you miss a payment, a private lender is more likely to work with you to come up with a solution. They understand that life happens, and sometimes, things beyond your control can happen.
Some lenders in the mortgage industry often take advantage of such situations to make a profit. On the other hand, a private lender will be more understanding and flexible because they want you to succeed. They understand that if you’re successful, they’ll get their money back plus interest.
So, if you’re looking for a loan and are struggling to find one from a traditional lender, consider going to a private hard money lender. You may be surprised at how willing they are to work with you.
And, if you’re successful in your endeavor, everyone wins. So, it’s an option worth considering for your next loan application.
It’s Easy to Maintain Transparency
Although most traditional lenders often list down all their fees and bank charges on their documents, some are often hidden in plain sight. Many borrowers find out about all these hidden charges when they start making their repayments.
But with private hard money lenders, there is more transparency. They are honest and upfront about all their fees and interest rates. This way, borrowers will know exactly how much they need to repay, and there won’t be any hidden surprises later on.
This is especially important for first-time borrowers who may not know all the jargon and technicalities involved in taking out a loan.
It’s Easy to Beat Your Competitors
Thanks to the fast loan approval process and quick funding, you will get the money you need in a shorter time frame than traditional lenders.
This is very useful if you are bidding for a piece of property against other investors. You can often get the funding you need within days or even hours with private hard money lenders. This way, you can put in your offer quickly and beat out your competitors.
Work With a Hard Money Lender Today
Now you know all the great advantages of working with a hard money lender. Thus, it is clear that private hard money lenders have many advantages over traditional lenders, which is why they are becoming increasingly popular among borrowers.
So, if you need a loan for your next real estate investment, be sure to work with a private hard money lender.
Do you need funding for your next investment property? Contact us today at Orchard Funding and see how we can help you. We understand that each situation is unique, and we offer custom loan solutions to meet your needs.