The role played by private money lenders in the modern economy |
Posted: June 25, 2018 |
When you are looking for money to make a purchase, the first place you will start looking for it from is the bank. However, the modern economy crashed over a decade ago and has stayed low for so long across the globe. This is why getting a loan even today from the banks has become quite a process. There are other lenders that have emerged and become quite common today, they are called private money lenders. Service provides Grand Rapids Private Money Lenders have come up strong to give boost to business owners and those looking for quick cash for development purposes. They offer the most competitive rates in the modern terms. Who are private money lenders?We all know what banks are what they do. Apart from this, those who have purchased properties like a house for example, know how mortgage funders work. These are institution based lenders that are established to offer more than juts financial assistance. Private money lenders work in the same manner, only that they are not institution-based. As the name suggests, they are private and are commonly referred to as “hard money lenders”. They offer private loans money loans to fix-and-flippers as well as ling term investors, basically anyone who needs financial boost but can’t go to be banks for some reasons. Investors looking for rehab projects, quick funding and or cash-out refinancing can find these services most convenient. How do they work?The loans that banks and other institutions offer can be secured by anything else. For private money lenders, the loan is secured by the asset they have or want to purchase. The loans they offer are used to renovate a house, condo or multi-family house. One thing to know is private money lenders is no something you should struggle with understanding. If you have ever borrowed money from a friend or a family member on short-term basis, then you have received services from a private money lender. This means it can be something from a close family member to and established lending firm as the one mentioned above. When the term private money lenders are mentioned, what come in the minds of many people are hard money lenders. Which true, they are the same thing, but it should not be made too hard to understand that they are “relationship based” lenders. Hard money loans are good and most helpful for bot short term borrowers and those looking to invest in long term projects. There are three degrees of private money lenders that you need to be aware of. The knowledge can help you make the right decision when borrowing a loan in future. The three categories come by based on the relationship between the borrower and the lender. They are: Primary circle; this includes anyone in the family circle including friends. This is the most basic degree of these lenders. Secondary circle; these are people who are not s much close to the borrower. They could be work colleagues, professional and personal acquaintances. In simple terms, they are people you have met in life and spend most of you time with and have come to trust you. It could be someone referred to your by a family member or friend. As long as you get acquainted to them and they offer you the loan, they fall under these categories. Third-party circle: these are accredited investors ad hard money lenders. There are those individuals who might have money but no investment ideas. They therefore fund other projects for a certain percentage; private investors. Hard money lenders fall under this category as they are established specifically for the purpose. It is important also to not that, hard money loans are short term, basically 1-3 years. They have an interest rate ranging from 7 to 14% apart from lender fees of between1.5% to 10%. Even the loans in the primary and secondary circle have terms, rates and costs that vary widely. Importance of private money lendersThe offer quick loansWhen you want o do a quick renovation for your house, or have seen a nice property you want to invest in, you will need cash. Going to the bank could be a good idea; however, it might take quite a long time to get the bank to approve the loan. By the time that done, it could be that the property is already sold. Private money lenders offer instant cash in most cases. When you need it they are there for you and you can get your property without delay. If you are borrowing from the primary circle for example, it is very easy as long as they have the money. You can even decide to do the investment together. They have flexible termsWhen you go to the bank for a loan, there are a lot of rules you have to follow. At the end of the day, your loan might not even be approved. For example, banks consider your credit report and if it is quite low, they may not give the amount you want. Again, you might not get the full amount requested for as banks have a way of determining how much you qualify for. Private money lenders are more flexible as they don’t consider so many things. As long as you have the ability to pay, you credit report might not affect anything, they might not even consider looking at it. If they consider it, it will be a very low score required. Because they come in many shapes, terms and qualification for a loan vary widely. The point is, if you miss to get from one person, you will get the loan from another. They can offer rehab fundingRehab loans are those loans that are applied for to purchase and renovate a property at the same time. Instead of applying for two loans, you receive one but use it for two purposes. Conventional mortgages will never allow something like that to happen. Before they finance a house, they will require it to be in good condition. Final thoughtThe role that private and hard money lenders play in the modern financial real is very important. The help drive economy to greater heights and going to them could be the best option. The secret is finding the right.
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