What is the difference between a hard money lender and a private lender?

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It’s quite a question for a borrower what lender to choose when there are a hard money lender and a private lender. What is the difference between them? Which one is better?

Although there are differences between them, they are similar in some aspects of their operations. Therefore, it’s essential to understand all the nuances to quickly find out what lender is the best for finance deals.

Who is a Hard Money Lender?
Hard money lenders are private lending institutions offering loans secured with real estate. These lenders can close the loans faster than a bank, but their interest rates are higher than those provided by banking institutions because of the higher risk and shorter loan terms.

Who is a Private Money Lender?
Private money lenders are almost the same as hard money lenders, but with one difference — private money lenders have their own funds and do not depend on third parties to lend money.

What is common in hard money lenders and private lenders?
The most important thing that the lenders have in common is none of them is restricted as a traditional lending institution is.
What are the benefits?
It’s faster – you don’t need to wait weeks or months to get a loan. Usually, your loan is approved in some days.
No credit history required – With traditional funding, your credit score is the most important criterion to get a loan. Whereas it’s not the same with hard money and private money lenders.
Liquidity – You’re able to leverage your own cash and stay more liquid when you’re using other people’s money (OPM). This also helps you spread out the risk rather than taking it all upon yourself.
Flexibility – Private lenders can offer very flexible lending terms, whereas hard money loans don’t have any prepayment penalty.

What are the differences between hard money lenders and private lenders?
Usually, hard money lenders estimate loans based on the collateral and value of the property if the borrower defaults on the loan. But, with private money lenders, the primary purpose is to offer a good shot for both the borrower and lender. Considering they control their own capital, private lenders tend to form their overall success on the success of their clients.

Even though a private lender may check the borrower’s credit history, financials, and track record to qualify them for a loan. Often, the most important thing is the borrower’s real estate investing experience and the potential relationship the lender can establish with the borrower.
The intensive involvement and flexibility of a private lender let them immediately to any unforeseen circumstances. As we already said, a private money lender wants the deal to work for both parties, so generally, they are more willing to reconsider the terms if necessary. Finally, the collateral serves as a “Plan B” if the borrower can ultimately not repay the loan.

LBC Capital is a top Californian private money lender where you can get a hard money loan fast, securely, and without any stress. We have our own fund, so you don’t have to wait for a long time till your loan is approved (it takes only up to 24 h). Another great benefit is if you need an enormous loan amount, we are ready to give it to you. We offer loans from $ 50,000 up to $ 25 million. With over 15 years of experience and more than 7500+ closed deals, we can guarantee the reliability and security of the deal.
If you are looking for a private lender, we are available in California, Washington, DC., Florida, Texas, and North Carolina. In addition, Nevada and Arizona are coming soon.

Check our recent article on will the loan cover repairs if I am trying to fix and flip a property here.

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