When it comes to securing a loan for real estate, most people turn to one out of two possibilities: a conventional loan from a bank or financial institution or a private lender that offers non-traditional financing. The terminology between the variety of private loans can lack clarity, but understanding the difference between private and hard money loans is more clear-cut than you think. Let’s examine closer where the distinction lies.
What Is Private Money?
Since a private loan is non-institutional and not governed by banking regulations, the private lender can offer a borrower a loan if they qualify under whatever criteria is deemed fit. Basically, terms will vary from lender to lender. Average real estate borrowers will discover that these terms are more flexible and negotiable for shorter-term projects than other traditional financing routes.
What Is Hard Money?
The difference between private and hard money loans lies mainly in how a hard money loan is structured. A hard money loan refers to a “hard asset” loan, which commonly uses real estate as collateral. The decision to offer a loan or not is generally based upon the equity or value of the property (aka the underlying asset) for which the loan is being made. Hard money loans are customarily business-based loans for investment properties, such as residential or commercial properties.
Commonalities and Differences
Either option of a private loan or a hard money loan can have its own advantages and disadvantages. Any non-institutional lender can consider themselves as a “private lender.” What needs to be examined is the qualification for a loan and its terms. Hard money lenders have a clearer process for loan qualification, with available loan solutions for borrowers who meet the criteria. Above all, hard money lenders are experienced and licensed to lend directly to real estate investors.
If you’re in need of direct private lending services, reach out to us at Val-Chris Investments.As hard money loan lenders, we originate private money loans to meet the requirement of both investors and borrowers. Whatever requirements you may have, our creative funding solutions are sure to fit.Get in touch with us today.