4 Requirements for Private Money Loans

Private money loans are an alternate source of lending that many people turn to when they are denied by traditional lenders. Private money loans are still done despite credit history and other problems. The standards for receiving private money loans have more to do with other factors. If you are searching for financing alternatives, private money lenders might be the answer you've been searching for. So what does it take to qualify for a private money loan?

1. Prime Property

One criteria that will always be true of private money loans is that they are for good properties. You won't find as many private lenders that are willing to loan money to a run-down area of town. The reason for this is that they sometimes have to foreclose on the property and they want to make sure that they can get back their investment. If they feel that the property is not worth the loan that you are asking for, they will probably not accept the application. You need to own a solid piece of investment property that could be sold again within a reasonable period of time if you were the private money lender. The lender will look more at the property than they will at your credit rating. The property is where most of their interest lies. Take this into consideration before applying for a hard money loan on a questionable property.

2. Desperation

While it is not a requirement, you pretty much have to be desperate to use this type of loan. The interest that is charged by private money loans is much higher than you could obtain in the commercial lending market. Many times it is three or four times higher than the going rate in the market. Private money lenders know that they can get away with charging this interest because people that use their services are desperate. They often have to choose whether it is better to pay high interest or lose their homes. More times than not, they will gladly choose the high interest rate. 

3. Local

Many private money lenders only do business in certain areas of the country. Many times, they confine their investments to one geographic region, such as a state or city. If you find a large private lender that advertises online, this probably is not the case. However, many private lenders only lend to their local area. This means, you will have to look in local places to find them, such as classified ads or the yellow pages. 

4. Sufficient Income

Even though private lenders are a little more relaxed with their application process, they still would like to see that you have a means to pay back the loan. They will want to see your employment history and make sure that you have some sort of income coming in. If you do not, they probably will stay away from lending you the money you need unless you have a cosigner. 

 


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