How To Decide Between Borrowing From Private Money Lenders Vs Banks
Oct 05, 2016
What is the best lending option for you? The mortgage world can be a confusing arena that is understood by few. Yet, with constantly rising real estate prices; most people are not able to purchase real estate without getting a mortgage. In this article, we will discuss how a borrower can decide between using a conventional lender and a private money lender. Some will be looking to purchase a home. Others will need commercial real estate financing for an investment property or commercial property for their business.
Regardless of what your financing needs may be – getting useful information and questions answered before deciding on whether to use a private money lender or a bank is key.
Every Borrower's Real Estate Financing Needs Are Different
To make the best decision, a borrower looking for a real estate loan should research their options and consider their financial standings. Comparing the pros and cons of each option will help determine which direction would be the best financially.
Mortgage loans from a bank, also known as a conventional lender, are currently the most popular and widely sought after loan options. Banks do offer a wide variety of good options for a qualified borrower. However, bank loans are not without their limitations.
First, due in large part to the regulatory changes following the Great-Recession, obtaining a bank loan is more tedious and time consuming than ever before. The application process to get a conventional loan can feel “never-ending”. Conventional lenders often require a clean financial history, proof of funds, providing personal finances and bank statements, W2 or 1099 forms, tax records, profit and loss statements, paycheck stubs, mortgage payment records, a schedule of assets (like real estate, car titles, mutual funds, and jewelry), a complete list of your debts including student loans, car loans and child support payments. This list of items is just part of the loan package. The information request gets even more cumbersome if the conventional lender has questions or finds any areas they deem concerning. Obtaining copies of all these documents can be a real hassle to gather together – not to mention the possible identity theft risk associated with releasing so much personal information.
Moreover, there are a good number of people and businesses that do not qualify for a mortgage from a bank. These borrowers may have a foreclosure, bankruptcy, or less than perfect credit that, in many cases, can automatically result in a loan application denial.
“Private Money Loans Can Be The Ideal Alternative Real Estate Financing Option.”
Luckily, these real estate borrowers have options. Private money lenders, like Riverdale Funding, specialize in providing loans for those who do not qualify for a conventional mortgage or have had their loan application declined by a bank for a loan.
Benefits Of Private Money Lending
Private money loans, can be the ideal alternative real estate financing option.
- Minimal loan application
- Fast to Approve a Loan
- Hassle Free
Private money lending by Riverdale Funding is asset-based. This means that Riverdale Funding’s primary consideration for providing a loan to a borrower is the value of the subject commercial property, and never the borrower’s credit score of financial history.
Private money loans do tend to come with higher interest rates, compared to conventional lenders. However, this higher rate is associated with the higher risk a private money lender assumes by not considering a borrower’s credit or financial history, and sometimes property standing, as a focal point in their decision to lend.
Bridge lender loan terms are also able to be more flexible to better fit a borrower’s needs. In contrast, banks have strict guidelines and standards they must follow in order to lend money. Additionally, with Private money lender’s, like Riverdale Funding, there are no multiple levels of approval to clear. All funds lent out by Riverdale Funding are controlled internally and all decisions to lend are made in-house.
Contact Riverdale Funding today to determine if you are a candidate for one of our asset based bridge loans and experience our hassle-free process!