Private money lenders are the best options for property investors. This is because they have faster processing times, have less stringent rules, disburse funds quickly and most importantly, have the same view of investments as the borrower. So, if you are still skeptical of private lenders after the above list, below are further explanations on why you should do business with private lending firms.
Simultaneous Loan Option
Getting a loan from the private or hard money lender is the best option for real estate investors. Unlike traditional lenders (banks), private money lenders can offer loans to investors concurrently. This means that they can finance more than one project at the same time so far you can afford the required down payment and the asset to serve as collateral. They offer flexibility in terms of fund disbursements and unlike the banks; they often include repair cost with the home purchase cost.
Unlike the traditional lenders, the private or hard money lenders are flexible with their rules. They offer less stringent rules and they do not follow the standardized underwriting process like the traditional lenders. Therefore, they treat every deal carefully and develop personalized rules and guidelines suitable for each deal. For example, low credit score, insufficient income, short sale or foreclosure does not deny you access to funds so far you can afford the down payment and have a good plan for the asset that you are proposing.
Rapid Loan Processing
For real estate investors, time and speed is one of the most important things to make a successful deal, because the best deals don’t usually wait around. Unlike the traditional lenders that spend around two to three months for loan processing, the private or hard money lenders can do the necessary screening and disburse funds for a project in a few days to a couple of weeks maximum. This is possible because the private lenders have flexible rules and do not ask for most of the requirements the traditional lenders do ask for. So, if you are just starting or needed to fund a deal as soon as possible, the private lenders should be your best option.
Customizable Loan Options
The conventional lending firms like the banks are usually skeptical in releasing funds, so they place a tight restriction on property loans (i.e rigid limits on simultaneous loans, financial background check, long period of paperwork and higher credit score). Although the private money lenders do ask for a credit score, employment data, etc., those are not the bases for loan qualification with them.
Moreover, a property that does require extensive renovation (fix & flip) cannot be funded by conventional lenders no matter how qualified the borrower may be. But for private lenders, they have customized loan options for different deals like the fix & flip loans, bridge loans, etc. So, if you need a loan and do not qualify for a bank loan, visit a private lender today, they always have an option that fits your plan!
No Prepayment Penalty
The payback period for loans funded by private lenders is usually short, between six to 12 months. For most people, this is one of the disadvantages of private loans but for real estate investors, this could be an advantage. Why? For example, when you applied for a 15-year mortgage, you are required to pay back the loan within the 15 years (i.e. your last payment should be made in the 15th year). And if you decided to pay back before the 15 years elapse, you would be required to pay a certain fee (prepayment penalties), which is equal to a certain percentage of your loan.
For private lenders, there is nothing like prepayment penalties. You are free to pay back anytime you like (even if you receive funds today and you decided to pay back tomorrow)