Often referred to as “hard money lending,” commercial private money loans are primarily used in real estate transactions and are secured by real property. While there are pros and cons involved in all types of loans, private money lending often gets a bad rap due to misconceptions about the practice.
Here, we’ll debunk the five of the most common myths about private financing.
Myth #1: Private Money Loans More Expensive
Interest rates for private money loans can indeed be higher than for the cheapest bank loans. However, this only applies to the very best bank offers, which rely on several factors, including:
- Your credit rating
- Payment history
- Current economic conditions
In actuality, commercial hard money loans can be extremely competitive. As with all financing, your qualifying rate will depend on individual factors. For example, if you have more capital to invest, you can look forward to a more favorable rate.
Myth #2: The Lending Process Is Slow & Plagued With Red Tape
On the contrary! This type of financing tends to move very quickly—considerably faster than bigger banks. When you choose to finance with a commercial private money lender, you can usually expect your loan to close as quickly as is legally permitted.
Myth #3: Private Money Loans Are High-Risk
The majority of this type of financing is funded by the lender’s capital. As such, it’s in no one’s interest for them to fail. And while they may have unique challenges, they’re usually backed by extensive knowledge of the real estate market and the factors necessary to see a project through successfully.
Myth #4: The Terms Are Prohibitively Severe
While they have “hard” in their name, most hard money lenders are eager to negotiate loan conditions to the satisfaction of both parties. Plus, fair-lending regulations are in place to prevent Draconian contracts,
Myth #5: Private Money Lenders Are Predatory
All hard money lenders must comply with state and federal regulations. This includes full financial disclosure. While some of these lenders fall into the ruthless loan shark category, the majority are simply looking to make a reasonable profit while helping you achieve your financial goals. By practicing due diligence, you can identify a lending arrangement that is a win-win.
Nevada Real Estate Loans
Not sure whether commercial hard money financing is right for your next real estate investment deal? To learn more about the lending process for Nevada real estate loans, contact the NV Capital Corporation team today.
