When you need financing quickly, locating and securing funds could prove to be an obstacle. Traditional banks and credit unions tend to have stringent guidelines and the process usually takes longer. This is why some borrowers have turned to alternative funding sources such as private lenders.
A private money lender is a firm or individual that loans money to fund purchases or large transactions such as real estate deals. These lenders do business differently than a regular bank and offer upfront financing with a specific payback period. They have fewer restrictions and can have more lenient credit score requirements. The appeal of a private money lender is their ability to bring speed and efficiency to loan requests.
Let’s take a look at some situations when you might need funds from a private money lender.
Cash Transactions
The attraction of firms like hard money lenders in California is the ability to obtain cash if you need it. Real estate investors like having access to cash from a hard money lender because they can make offers they wouldn’t be able to make otherwise. As with most transactions, being a cash buyer gives you more bargaining power.
If you are looking to make a future large purchase, traditional bank loans will take time and might not give you the buying power of cash for your purchase. Sellers tend to favor buyers with strong cash offers. When purchasing things like an investment property or an automobile, cash offers find more success as some sellers don’t want to deal with the wait and requirements of a traditional loan from a bank.
Quick Financing
Getting financing quickly can be difficult with a traditional lender. Perhaps you have found a deal that requires you to move on quickly. In most cases, regular loan programs have a prolonged timetable that might not fit the parameters of the deal. Often investors need working capital immediately to close deals and rehab properties quickly. Fixing walls or putting on a new roof with Arlington roofing contractors or other construction specialists will cost money and waiting for loan funds will take valuable time. Securing funds from a hard money lender will help you capitalize on speed and efficiency.
The downside of quick financing through private money lenders is slightly higher interest rates. If time is a concern, however, then fast financing could be worth it. The benefit of a hard money loan from a private lender could mean the opportunity to close more deals quicker. If you are a real estate investor hard money could equal time and that is a valuable asset.
Credit Issues
Money from a private lender can be beneficial for borrowers in several ways. For those with less than perfect credit scores, however, it could be a solution. A benefit of a hard money lender is the ability to secure funds without the traditional credit requirements. As discussed, these funds will come at a cost in the form of larger interest rates, but they can be the solution for credit issues.
If you are interested in making a large purchase, but your credit is holding you back, a hard money lender can help. Purchasing a car can be one of the things that you might find difficult to do with poor credit. Given that there might be increased interest rates and inflated costs, you will need to research to be sure of your purchase.
If you are looking to purchase a self-driving car, for instance, you will want to make sure that it is worth it. Carefully examing facts like self-driving car accident statistics will help you be sure that you are making a smart choice with your funds from a hard money lender.
Whether you are looking to invest in real estate like residential property or purchase a driverless car, a private investor might be the way to go. Securing funding from a hard money lender could make the process fast and efficient. Private money lenders are reshaping financing. No matter if you are a first-time real estate investor looking for a flip loan or a property owner with years of experience looking for capital, hard money from a private lender can help.
From borrowers with stellar credit and a vast portfolio to new borrowers with sub-par credit, many situations can require hard money from a private lender.
