Private Money Lenders – Things You Should Know

Do you need to borrow some money for your next purchase, renovation or a project? Have you considered private money lenders? These are non-institutional lenders ready to issue a loan to a borrower for different purposes. Sometimes, private lenders are referred to as “hard money lenders” and, contrary to what most people think, they don’t issue short-term loans only, but also long-term ones.

Basically, there are three categories of private money lenders depending on the relationship between the lender and the borrower. First, you have “a primary circle” which consists of your own friends and family. The second category means borrowing money from co-workers, professional and personal acquaintances. Hard money lenders and accredited investors fall into the third category. By definition, the third categories are still private lenders, not banks, credit unions or financial institutions, but private individuals and companies that are willing to issue loans to private borrowers. Since there are fewer regulations, both borrowers and lenders can benefit from private money loans.

If you believe that lending some money to a friend or borrowing from a family member can lead to an end of a loving relationship, and yet you cannot trust people who you do not know well (acquaintances or colleagues), but for some reason you need a private money lender, you might consider hard money lenders. They are the furthest away from borrowers, but they usually have standardized terms, fees, costs and rates. Hard money loans are usually short-term investments (one to three years long) and the interest rates are somewhere between 6% to 13% with fees somewhere between 2% and 10%. Private lenders from the first and second categories issue loans with various costs, rates and terms.

Are private lender right for you? Hard money lenders can be the right for you if you need to purchase, renovate and/or sell your house within a year. Also, if you are a long-term investor that cannot qualify for conventional mortgage or if you’re at the limit of 5 to 10 loans, private money lenders could be the answer to your needs. Finally, anyone who needs financing quickly, no matter if it’s a long-term or short-term investment.


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