Top 4 Advantages of Private Money Loans
Private money loans mostly refer to loans provided by
non-institutional lenders. Such lenders mostly involve private investors or
companies. If you are seeking a short-term loan to purchase a fix and flip or
rehab property, then you may want to consider turning to a private money
lender.
Benefits of Private Money Loans
There are many benefits offered by
private money loans. These include:
·
Faster
Access to Funds: You can get private
money loans much faster than from regular financial institutions. If you turn
to a bank for a loan, you will most likely have to wait a minimum of 30 days to
receive funding. In addition to the longer wait times, the required
documentation and application process can be quite tedious. In contrast, you
can get a loan from a private lender much quicker. Not only is the list of required documents
required by a private lender minimal, but you will interact directly with the
lender which streamlines the approval process. If you provide the requested
documentation in a timely manner, a private lender can typically fund your loan
in a week.
·
Get A Competitive
Advantage: Private money loans can give you an incredible advantage when
you are trying to buy a property in a competitive market. If there are multiple
parties interested in a hot real estate investment deal, the early bird is
likely to get the worm. Fast funding equals access to profitable properties,
and a hard money lender is a great partner to have in these situations. If the
private lender finds value in the property and you have enough equity in the
deal, you can get funding lightning fast compared to a traditional bank.
·
Simplified
Repayment Terms: You will have
greater flexibility in structuring the repayments with a private money lender
than with a financial institution. If you take out a loan with a large
financial institution, the repayment terms are set out by the bank as per their
defined policies. Though some adjustments may be made, most of the time you
will have to accept the repayment structure set by the bank. On the other hand,
you are likely able to work out a mutually agreeable repayment term with a
private lender.
·
Avoid
Unnecessary Charges: You can avoid paying unnecessary charges when you opt
for private money loans. For example, many major lending institutions often
have a prepayment penalty clause. This means that if you decide to repay the
loan amount in full before the expiration of the loan, then you may be subject
to a penalty fee. You are not likely to face this issue with private lenders. If
you come by some extra money, say from the sale of another investment property,
you can easily pay down your hard money loan with your private lender without
facing fees.
If you are in the real estate
investment industry and consider a private money loan to be in your best
interest, the next step is to find a reputable lender. Check the track record
of the private lenders in your area and do thorough research on their company
and try to obtain some testimonials from previous borrowers.
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