Learn The Basics Behind Private Loan Lenders
A private loan lender is an individual or collection of individuals who loan money for real estate at higher than normal interest rates. They are synonymous with hard money or bad credit lenders because borrowers with high credit scores and borrowing history almost always stick with bank loans due to the more reasonable interest rate. Bad credit loans carry a high annual percentage rate, often b/n 10% and 15%; while high, this can be a good why for poor credit borrowers to rebuild credit and hold on to their current real estate holdings.
Private Loan Lender vs. Traditional Lenders
A traditional home mortgage loan is made through a bank or financial institution and requires 10%-20% down payment (although FHA home loans bad credit require as small as 3% for a down payment). Traditional mortgages are often 30, 15 or 10 year year fixed rates or 7, 5, or 3 year adjustable rate mortgages.
Private loans are made through a private loan lender or funding source. They usually require 25% - 45% equity in a property due to the increased risk that the lender takes on with the borrowers credit history, financials, etc. These hard money loans are structured for shorter terms; 1, 2 or 3 year fixed rate loans, but at much higher interest rates.
What To Look For In a Private Loan Lender
The most important issues for poor credit borrowers is to find bad credit lender who is transparent and trustworthy and one that offers an acceptable interest rate. Finding up to 3 lenders is a great way to compare rates and terms and then to be able to choose the loan that best fits your needs. This isn't always possible because often there are only 1 or 2 lenders willing to make the loan or the borrowers hears the loan terms offered and it carries too onerous rates for the borrower.
A quality private loan lender should specialize in these loan types or have access to multiple funds or lenders in order to open up as many lending scenarios as possible. Never use anyone who puts undue pressure into accepting a mortgage that you won't be able to pay back. These loan to own sharks prey on vulnerable borrowers and are best avoided if at all possible.
Repayment To A Private Loan Lender
Bad credit home loans need to be paid back by the end of the loan term or the borrower needs to refinance the loan prior to the loan period ending. The best case scenario is this: a borrower takes the hard money, makes the high payments, rebuilds credit and improves their financial situation and then in 18 months refinances into a subprime or traditional mortgage at a lower interest rate.
Private Hard Money Lender
Private Home Loans
Private Money Lender
Last Resort Lender
Bad Credit Refinancing