Private Money Lending Vs. Traditional Lending: Which Option is Better for You?

Real estate properties are considered hard assets, attracting investors from all corners of the globe. However, investment capital is sometimes a challenge for many investors. The good news is that there are several sources of capital investors looking to fund a real estate investment.

Now, these financing options are categorized under two options: traditional lending and private money lending. A traditional loan refers to conventional bank financing, while private lending is provided by companies or individuals who offer private loans to investors in the real estate industry.

But which of the two is the best Asset Based Lending option?

The truth is private money lending is the most suitable option because the process is fast and the terms are a lot friendlier compared to traditional lending options. But that’s not all. Below we’ve discussed more reasons why private money lending is a more attractive option.   

1. Private-Based Lending

Private money lending focuses on property value. This means you don’t need to prove you can repay the loan. You just need equity in your property – as long as you have an exit strategy.

Your exit strategy could be a sale of the property or a refinance into a long-term first mortgage when you have built up more equity in your property.

If borrowers default on their private money loan, private lenders have a security interest in the real estate collateral. This means they can foreclose on it and resell it to recoup their losses – as long as there is sufficient collateral.

2. The Process is Fast

The process of applying for a traditional loan can be lengthy and time-consuming. It can take months to get approved and even then, you might not be eligible for the required sum.  

Private money lenders can get you the money you need in a much shorter time. You will not have to wait months or even weeks for all the paperwork to go through, which can be highly beneficial if you are getting ready for an auction or need to close on a property quickly.

3. The Process is Less Restrictive

Private money lending is less restrictive than traditional mortgage loans. For example, there are no credit score requirements. As long as the borrower can pay back the loan, they can qualify for funding.

Also, the application process is much easier than with a traditional bank loan. You only need to fill out a short form with basic information in most cases.

4. Less Paperwork to Fill

Traditional banks and mortgage companies have to follow strict federal guidelines. This means that there is a lot of paperwork for you to fill out and a huge amount of time will be spent making sure the paperwork checks out.

In contrast, private money lending is much less stressful. There are fewer documents to sign because there are no government regulations to follow. As a result, the process is faster and easier for everyone involved.

One example of a private money lending are online loans, these loans can be very flexible, with guaranteed fast approval, and they even have no credit check loans. For short, anyone can apply for online loans PaydayNow.Net

Consider Private Loans as an Asset-Based Lending Solution

As you can see from the points highlighted above, private money lending is a quicker, hassle-free process well-suited for anyone planning to close on a property quickly but lacks the financing to do it. That said, carefully pick out a private money lender by considering the terms offered, past reviews from former clients, and how familiar they are with the real estate space.