There is a common misconception that private money loans and hard money loans are one and the same. The reality is that hard money loans are a form of private money but private money loans are not always hard money.
A hard money loan is a specific type of asset-based loan financing through which a borrower receives funds secured by real property. Hard money, a form of private money, is issued by private investors. The key difference is that hard money is a loan that is only secured by the real estate asset and not the borrower. With hard money, the borrowers credit is insignificant and not important to the lender. Borrowers with poor credit can easily get a hard money loan when there is enough equity in the property to secure the loan. Hard money will usually require an LTV (Loan to Value) of 50%-60%. This gives the lender enough security that their funds are protected by the property. Hard money loans are also typically more expensive with higher interest rates and higher fees.
See my blog post title, “When to Use Private Money Financing“.
Private money loans are non-institutional (non-bank) loans, generally secured by a note and deed of trust, for the purpose of funding a real estate transaction.
If you are looking for a loan for your dream home, your next flix and flip real estate deal, or construction project, contact us for a no obligation loan estimate. We will be able to determine if we can offer you conventional financing or a private money loan based on your situation. Click here a quick quote
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