A private hard money money loan is another option for real estate investors when a traditional mortgage lender may not work for their situation. A private lender uses a property as an asset and collateral. There are a ton of ins and outs. Let’s break it down.

Getting Started

A private money loan is an asset-based loan. One of the biggest factors affecting the approval of a traditional loan is your credit history and income. Lenders want a candidate that possesses a reputable re-payment history because this demonstrates the consumer’s ability to repay loans.

However, it is no secret that a great credit score and a lot of income, isn’t necessarily a golden ticket to approval – the overall process can be invasive and take a long time. Private lenders utilize a different approach by lending funds based on collateral; therefore, the lender places less emphasis on credit history.

Private money loans are not for everyone, but there are several situations where these loans make sense. Thanks to Chip and Joanna Gaines, one of the biggest investment trends is flipping houses. If you’re just starting out, and do not have the capital to put up front, a private money loan makes sense – you’ll own the property for a short window so that you can remodel the property and sell it.

How Does a Private Hard Money Loan Work?

Generally, private money loans are contracted for a short-term – usually between 6 to 24 months. A real estate investor would not want their loan for a long period of time because the interest rates are typically higher than traditional loans. One of the biggest benefits of choosing a private money loan is the speed at which you can close. Walnut Street Finance can close quickly in a matter of days which is essential when trying to win the bidding war on a property for your next project.

Basically, private money loans allow real estate investors and developers the opportunity to purchase more properties and do more deals with less upfront capital which results in a great return on their investment.