Private lender vs hard money has been a long conversation that seems to have a common answer for which one is the best or maybe what the two entail. Through so many platforms related to real estate and money lending, the terms have been discussed and so many perspectives have been presented.
Basically, there are no set rules on when and how the terms should be used. However, it is important to understand when to say we’re dealing with hard and when we’re dealing with private money. Conventionally, private vs hard money could be only a discussion on naming terms that deal with local real estate loaning.
What we should however keep in mind is that the terms associated with real estate loaning vary as per the region. Anyhow, let’s find out more about hard money and private money.
Hard money is simply a loan that is determined by the underlying hard asset, often real estate assets. Therefore, a hard money lender is one who looks at the value of an asset and loans money according to the value underlying. In many cases, real estate assets are commonly used and they carry the whole value of the loan.
However, it is important to consider the fact that very few hard money lenders are trustworthy nowadays. The major attachments to the loan are basically the documentation for the property underlying. Some might be exactly the same documents that are required during any other conventional loaning process.
Private money is the money lent to a person to a private entity. The measure of value can be whichever criteria chosen by the lender as agreed upon by the borrower. Private money lenders can be either a person or a private company or any other organization or company. The means of finding the attached value can be as basic as any other determinant of trustworthiness.
What Do They Have in Common?
We may have realized that although the two seem to be so different in how they operate, there can still be something they share in common. They might be few but there is quite a similarity in what they consider and what they don’t.
In both private and hard money lending, there are no conventional rules that are set to govern the money lending process. The agreements that exist have got to do with what the two parties involved agree on.
However, in matters of money, there are some laws that cannot be bypassed whatsoever, therefore in both, there is the aspect of sticking to the laws of lending. Both private and hard money has to follow the lending laws despite the fact that the agreement is based on the two parties involved.
How Do We Differentiate Hard Money From Private Money?
Both the two have to do with one person’s organization lending out money to another or to a person. However, there might be some cases that will help us understand the scenario in real life better.
In the first case, if for instance, a person has a friend who would trust them so much maybe because they’ve grown together and they would not trust any other person with their money, the person decides to lend their money to the person they trust, then that is clearly a private money lending case.
In another case, if there is a form that often advertises as hard money lenders and you get in terms until the lending process is complete, that would be a hard money lending case.
Note; a money lender is not a hard money lender until they identify as one and agree on that basis. Hard money lending can be based on personal trust and that would be perfectly a private monetary scenario.
Apart from the cases cited above, we might have some other underlying factors that might bring in a difference between hard and private money.
The rates may vary but sometimes comparison helps a lot. The rates are so great a determinant whenever we have private lender vs hard money lender discussion. Therefore, that’s to say, if the rates are similar to those of other hard money lenders, then that could be a hard money lender as well.
Do they advertise or not
A hard money lender would publicly identify as one. Therefore if one is willing to do the lending even on terms similar to private money ones but hasn’t publicly advertised as one, they would be better considered as private lenders.
Private Lender vs Hard Money – What to Note
There are still no common clear-cut definitions to term this discussion, a comparison bit at least there is so much to consider for both entities. There are so many factors also that might classify one case as both. However, we have to realize that there are factors that may make one say this is private money lending and the other one is hard money lending.
Note that a private lender is often a person we have knowledge of or maybe we’ve related for a long time making our time non-transactional. The lending is often out of trust between the two parties involved. The charging could be locally rated and therefore no need for so many laws to be applied.
You could also read about private lender interest rates.
Private Lender vs Hard Money – Conclusion
Private lender vs hard money lender can be a discussion that has very much to come up with every time it comes up.
However, we have seen the major aspects that classify the two lending entities and they are almost entirely dependent on the lending agreement between the two involved parties unlike in others that tend to apply all the loaning laws and so many other rules that govern the lending of money.
Taking all we have seen above into keen consideration could be very important to make sure there is so much we already know about what we intend to do as far as money lending is concerned especially in terms of private and hard money basis.
More could come up on the same as well, and most importantly we should follow up on what comes our way in terms of this discussion.