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Banks vs. Private Money
W hen investing in real estate, unless you have cash, you will have to consider a choice of banks or private money. Let’s dive into each option to determine what is right for you. When banks and private money lenders evaluate deals, they look at the below main criteria. However, they each evaluate it very differently: 1 The borrower’s credit score and payment history. BANKS PROS Banks offer the lowest rates on the market. Since banks are subject to stringent regulations when it comes to the above criteria, they are better equipped to determine borrower’s risk of default on a loan. CONS Also, due to the regulations, many real estate investors find it difficult to qualify for the loan. Lengthy approval processes can take up to 90 days, which is not a viable option for a real estate investor whose goal is to close 2 The asset pledged as security for the loan. 3 The borrower’s ability to make payments.
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PRIVATE OR HARDMONEY PROS Private lenders, on the other hand, have some leeway when it comes to the approval criteria. Therefore, making private money a very attractive solution for many real estate investors. Private lenders look at the same criteria banks do when evaluating deals, but have lower requirements borrowers must meet. The loans could be closed in as quickly as one day and the terms are completely up to the individual investor and the lender. CONS Because of its convenience, private money loans typically come with higher interest rates. Investors must turn the property around quickly to minimize fees they pay to borrow the funds. IN SUMMARY Bank loans and private loans both have benefits and drawbacks. However, private loans appeal to the real estate in- vestment industry due to speed and viability. To find national and local private money lenders for real estate investment projects, visit PrivateMoneyLendingGuide.com. •
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