Flexible Hard money loans vs. Private money loans: Which one is right for you?

Buying your first investment property is an exciting journey. Imagine that you’ve finally found just the right property that you’ve always dreamt of, and you can’t wait to lock the deal. However, the bank is not really thrilled to finance it, which may be because of your not-so-perfect credit scores or the interest rates not aligning with your goals.

An alternative route to closing that deal would be applying for flexible loan options such as hard money or private money loans. Choosing between a hard money loan and a private money loan seems confusing to first-time investors, as both are quite similar.

Hard money and private loans are usually given to borrowers or investors based on their tangible, valuable assets by independent lenders or companies without going through the traditional banking route. These types of loans typically have higher interest rates and are offered for a short period, such as 1-3 or 5 years. In many cases, a loan can be available within a few days, rather than waiting several weeks. This article will drive you through the depths of hard money vs. private money loan options and ways to apply for the right loan for your business or property investment.

What is a hard money loan?

Hard money is a type of loan that is provided by an independent lender, such as a company or individual. It is obtained through hard asset values, which are, in most cases, tied to the value of the property they’re seeking investment in instead of credit scores or other financial aspects.

These are high-risk loans for the lenders. Hence, it comes with a higher interest rate and a short investment period. Down payments are usually pretty low compared to traditional mortgages; however, they vary depending on the property's value.

It is easy and fast to apply and it can be taken out for 3 months to 3 years. This type of loan is usually taken by developers interested in fixing run-down properties and selling them for a higher profit or by homeowners who want to refinance their mortgage.

Most hard money loans are structured as monthly interest-only loans; however, some prefer a balloon payment structure.

What is a private money loan?

Private money loans are offered by independent lenders or companies that follow their own terms to issue the loan. These types of loans are best for property wholesalers, business owners, or real estate companies. In general, anyone who doesn't want to go through the hassle of traditional financial institutions can apply for a private loan.

All private lenders have their own sets of qualifications. While some may heavily fixate on a high credit score, income proof, and tax returns; others may simply overlook it as long as there’s a tangible asset tied as collateral. Most private loans come with a higher interest rate, which is determined after evaluating the value and purpose of the property.

The loan term length is usually longer compared to hard money loans, typically ranging from 3 years to a maximum of 30 years. Private money lenders can use whatever conditions they are comfortable with when deciding the amount and interest rates.

Pros of having a hard money loan:

Hard money loans give you more chances to potentially fund more than one real estate deal at once. But before applying for a hard money loan, you might want to take a quick look at the pros and cons.

Pros:

Quick procedure: Quick agreement and funding procedures are suitable for short-term investment projects. Easier and faster compared to traditional loans.
Flexible terms and conditions: Hard money loans are flexible and do not require many documents to get approval.
Does not require a high credit score: It does not focus on a high credit score. Hard money lenders issue loans based on the value of the property so people with low credit scores can easily apply.

Pros of having a private money loan:

Here are the pros and cons of a private money loan you should know before looking for the most reliable private money lender.

Pros:

Faster approval: Fast access to loans for time-sensitive transactions.
Flexible options: Flexible amount of loan options as per borrower needs.
No fixed credit score: The lenders have their own terms in terms of credit score. Most don't look for high credit scores.

Which one is best for you: a hard money loan vs. a private money loan?

Figuring out the best loan type actually depends on your investment strategy. Hard money loans are great for fix and flip endeavors, while private money loans do not always cater to that. On top of that, you may also need to consider the loan period, different terms and conditions, interest rate, how much risk is involved, and probably the credibility of the lender.

Well, it takes a lot of research and one-to-one conversations with your lenders before locking in a deal. Here’s a head-to-head comparison between hard money and private money loans to give you a head start.

How do I get a flexible loan with Marked Rentals LLC?

Finding a reliable and trustworthy flexible loan lender is not as easy a task as many assume. To become a certified hard money lender, one needs to go through several documentation approval procedures and unfortunately, many companies these days lack them. Some even refuse to give loans to borrowers with low credit scores and really high tangible assets.

Marked Rentals LLC offers all that an investor needs to get started on their journey with flexible, easy-to-apply loan options.

To get a flexible loan with Marked Rentals LLC, you need to follow the simple steps, that won’t take as long as the traditional system. Instructions are given below:

Figure out your loan amount: First of all, you need to find out your needs. How much of a loan do you want and what is your ideal time to return it?
Prepare some documentation: Gather some necessary documentation, such as property information and investment plan for loans so that lenders have a clear view of your purpose.
Submit Application Form: You need to open our application form, read it very carefully, and then fill out the application as per your needs. After applying, we will check your application and once you are eligible for the loan, we will connect with you as soon as possible. Application link: click here!
Negotiate Terms: Negotiate with loan terms, including interest rates, loan amount, return schedule, any other fees or charges, etc.
Manage the loan: After the loan is secured, manage the loan responsibly by timely making payments and being aware of the schedule.

Wrapping Up

Overall, the alternative funding options are quite complicated for a beginner investor. Both hard money and private money loans have their own strengths and weaknesses. The perfect loan type will depend on the type of business, exit strategy, and purpose of the property.

Both of these loans provide easier and faster approvals than the commercial banking options available. Hard loans are comparatively short-term, providing loans for as short as 3 months to 3 years. Whereas, private loans can be both short or long-term, depending on the loan value, terms, and lender's conditions.

To get a more in-depth understanding of the flexible loan options and to find out which one is perfect for your specific needs, contact our website or apply through the form.

RealEstate@MarkedRentalsLLC.com

Phone

+1978-641-3652

Address

57 Wingate St. Haverhill, MA 01832

United States

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