Time and again, investors and other borrowers have mistakenly used hard money and private money interchangeably. However, the difference between them is clear as day that people often ignore. Undoubtedly, hard money loan Georgia, shares similarities with private money to some extent. But that’s no reason to merge the two terms together.
So, before you secure hard money loan Georgia you must understand the difference between the two. It’ll direct you to make the right choices and connect with an appropriate lender. So, let’s begin breaking down both of them and conduct an in-depth analysis.
Distinguishing Between Them
People usually turn to banks to secure a loan to buy commercial or residential properties. On receiving such an application, the loan offices will have their staff inspect their credit score and history, net worth, income, and other relevant factors.
Most banks will have certain terms that aren’t up for negotiations. A real estate investor might not find this process fruitful as it’s lengthy and time-consuming. For that, they usually turn to hard money lenders or private money lenders.
Private Money Lending
As the term suggests, a private loan is obtained from a private lender. The lender could be an organization or an individual. When it comes to private money lending, the lender can incorporate whatever rules or criteria the borrower and lender see fit while lending money.
One can secure a private loan from an organization, a family member, a friend, or any private citizen they choose.
Hard Money Lending
If you want to secure a hard money loan Georgia know that you’ll have to deal with a group of organized money lenders that call themselves loan companies. When compared with private money, the hard money lending is considered to be more mainstream. They share a lot of terms & conditions similar to that of the banks when it comes to disbursing loans.
The major difference between banks and hard money lenders is that the latter accepts requests from clients that banks have turned down upon.
Hard money lenders are usually less inclined towards a borrower’s source of income and credit history. It’s because they lend out money due to their interest in real estate investment. Since they’re not institutionalized, approving the loan request lies in their hands.
How Are They Different?
Some distinct features that set private money loans apart from hard money loan Georgia are listed below:
While the hard money lenders are legit and hold licenses, the private money creditors are not legally allowed to lend out money.
- Loan Term
Hard money creditors lay out strict guidelines and eligibility criteria, which is something not followed by private money lenders. The guidelines generally include rules, terms & conditions of the loan, interest rates, etc. On the contrary, private lenders could be flexible in any aspect they want.
Due to their widespread advertising, hard money lenders are simpler to find than private lenders. Adversely, to add to the difficulty, private money lenders don’t advertise themselves. So, you’ll never be able to get your hands on one easily.
What Are The Similarities?
Two of these potential lenders have more things in common than you’d think. For one, they aren’t as restricting as the conventional lending system is.
Real estate investors benefit from it in the following ways:
- Quick Dispersal: You need not go through multiple verification and documentation to secure a loan when choosing a private or hard money loan Georgia. Interestingly, you can get your loan approved in barely a week.
- Higher Flexibility: Both these loans have their own way of providing flexibility to their borrowers. While private creditors are pretty flexible about fixing their lending terms, hard money loan creditors don’t impose any kind of prepayment penalty.
- Credit Check Not Required: In a traditional funding setting, your credit scores have to be in compliance with the bank’s eligibility criteria. Fortunately, that’s not how it works with private lenders and hard money creditors.
- Allow Liquidity: When you use other people’s money, you can increase the power of your own money and maintain greater liquidity (OPM). Additionally, spreading the risk out rather than putting it all on yourself helps.
We hope the guide made the concepts of private money and hard money clear to some extent. It’s common to confuse them with one another, given the fact that they differ only slightly and come with unique drawbacks and potentials.
Choosing one between them varies from investment to investment. Having said that, it’s true that hard money loan Georgia extends a better level of security while keeping things flexible. Unless you aren’t versed in the working of a private lender, it’s recommended to apply for a hard money loan.
CambridgeHomeLoan.com brings you the opportunity to secure a hard money loan Georgia. We’re a leading lender in town. Our reputation for being the quickest hard money loan provider in the real estate market of Georgia has made us a reliable option. We will do our best to assist our customers in achieving their long-term goals without much trouble. Do you want to know more about the process? Well, then reach out to us via mail at firstname.lastname@example.org or give us a call at 800-826-5077.