So, you need to make a new real estate acquisition. Whether it’s a house you plan on fixing and flipping in order to turn a profit, or an apartment complex you want to turn into a long-term investment, you need to get a loan in order to close the deal. If you’re debating between hard money and private lenders, though, it’s important to understand the difference before you sign on the dotted line. Especially if you’re not entirely sure what the benefits are for using one option over the other.
Banks have loan officers who will evaluate a candidate based on their credit history, their current worth, income, and similar factors. Banks will often have specific terms for their loans, though, and those terms may not be open to negotiation. Hard money lenders, by contrast, are organized money lenders that are not banks, but which still operate as loan companies. Hard money lenders are more “mainstream” in that they have certain criteria for lending money, and their terms are laid out clearly. They often use many of the same criteria for deciding who gets a loan as a bank, but they often consider clients that a bank may have turned down, or projects which fall outside the scope of what a bank is comfortable lending money for.
Private lenders, on the other hand, are just private citizens (or groups of them) who offer to loan you the money based on their own terms.