Private money refers to loans obtained from individuals, investors or funding groups. With the current credit crisis, many real estate investors and home buyers are obtaining funding from private resources instead of traditional lenders. Private money loans can be used to purchase real estate, businesses, automobiles, farm equipment, investment properties and anything else a borrower would normally finance through a bank.
Private money loans are an excellent option for people with blemished credit. Lenders have placed tight constraints on lending practices, making it increasingly difficult for anyone to obtain a mortgage loan or business financing. For individuals with a low credit score, the chance of obtaining bank approval is next to none
There are numerous benefits to obtaining private money loans regardless of your credit score. When real estate is purchased with private money, closing can occur in days instead of weeks. Private lenders must adhere to usury laws, which limit the amount of interest they can charge. In most cases, interest rates applied toward private money loans are lower than can be obtained through banks.
Funding sources offering private money loans generally don't require mountains of paperwork. Although hard money loans are legally-binding and lenders can proceed with legal action should the borrower default on the loan, private lenders are more interested in the appraised value of the property than the borrower's financial status.
Private money loans are the perfect choice for real estate investors who engage in purchasing distressed properties for the purpose of house flipping. Since closing can occur quickly, investors can purchase foreclosure, bank owned or short sale properties; make repairs and sell the property quickly. While others are waiting for approval from banks, investors who obtain private money loans can be making money.
It is relatively easy to locate private money lenders. The Internet is one of the best resources for locating funding sources. Some hard money lenders advertise in the classified section of local newspapers. Private money lenders can also be located in real estate investing forums and social networking websites.
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Published on March 31, 2009 at 02:34 AM
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