One West is known as a hard money lender, meaning the capital used to finance private loans can be obtained either from a private lender, or other investors providing capital to the private money lender. In fact, one of the biggest reasons that real estate investors use private lenders is that private money loans have much more flexible terms and application criteria than banks. Private lenders for real estate do not depend so much on your FICO score, instead of using their investment expertise to determine whether you and your property are a good credit risk, taking into account all factors. Because private lenders for real estate are looking for investment properties, they are more likely to offer these rates for properties with no current cash flow compared with traditional banks, who are still more selective in what they will lend. Read on to learn about these benefits and more that One West can offer with our private lending services.
1. Private lenders have more structuring options
Because the private money lender works directly with investors, loans are structured to fit borrowers’ needs much more readily. For all the reasons mentioned above, private loans are an excellent option for first-time investors or experienced investors who might not be eligible for a traditional loan. Private money lenders such as One West are able to deliver funds faster and on a more flexible timeline, though an investor might have to pay higher interest rates and higher loan fees.
Private money lenders offer greater flexibility with regard to concurrent loans and often will cover the costs of repairs, something banks will generally not do. Private money lenders earn their money in a similar manner to traditional lenders such as banks or credit unions, through fees generated by the origination of loans, as well as the interest payments made on funds borrowed. Private investors are expecting to get a good rate of return from their investments, and the interest rates earned from the money borrowed from banks are higher than what banks are charging to make money.
This allows private money lenders to structure a variety of different types of loans that match the buyer’s exact financial circumstances. While they have many similarities with traditional bank loans, there are notable differences between them which may make private money loans the preferred financing option. Private borrowers are able to fund multiple deals simultaneously, without the strict limits banks impose on the number of loans. Private loans are perfect for entities and LLCs, allowing those who prefer to borrow under an entity’s name due to tax advantages or security reasons to get approved on properties.
2. It’s easier to get approval from Private Lenders
Private lenders base their offerings on hard assets — in this case, real estate — and they may provide nimble terms, with loan terms that are sometimes shorter than you would find from a traditional lender. Rates are typically lower when getting mortgages through a bank than a private lender, however, many individuals cannot have their loans approved via a traditional bank’s mortgage lending routes. Because these loans may have higher levels of risk, interest rates are also slightly higher than you would receive from a traditional bank mortgage. If the risk seems slightly higher, the private lender will usually still extend you the loan the traditional bank would not, with the interest rate being slightly higher in order for private lenders investors to be more comfortable that the institution is taking on this risk.
Private lenders allow for greater flexibility with respect to the properties that are being secured, providing funds for commercial, special purpose, spec-built, and renovated projects, and infill land. By combining many private lenders’ funds, they are able to help finance projects as diverse as house flipping and multifamily housing development, then collect a financial return once these projects are completed. Private loan platforms, especially online direct lenders, but also P2P networks, help to mitigate risk, connect individuals who might otherwise be unable to put down capital, and offer financing solutions for individuals and businesses that would not otherwise have the ability to reach their goals and turn their dreams into a reality.
3. Private lenders are more flexible
Traditional lenders must follow a very specific set of steps before they will loan you money, but private lenders establish their own rules, so they can define what they must see before they release your funds. In many cases, you may receive the cash you need from a private mortgage lender in just days, compared with the weeks that it may take for a bank to release funds. The terms for a private money loan typically range between 6 to 60 months, depending on the projects that are being funded by the loan, as well as the lender’s individual criteria. Loans can come in a variety of forms, such as personal loans (P2P), or more often, real estate private loans, in which a private individual loans a real estate investor the money to purchase and/or repair the property.
Private lender loans typically come with easier qualification requirements, which makes it possible for even prospective borrowers with poor credit or no credit to get financial tools tailored to their plans and goals. As such, getting approved by a private lender is often easier than a traditional bank, since private lenders are able to tailor each loan to an internal set of criteria, such as credit score, loan-to-value ratio, and debt-to-income ratio. Easier qualification/shorter approval process: There is much less bureaucracy involved in applying for private mortgages. One West makes it easy to get a hard money loan from a private lender, so contact us today.