What’s the difference between a private money lender and a hard money lender?

The short answer is that there are some differences—and if you’re a real estate investor, you’ve probably heard the two terms used interchangeably.

Differences Between Private Money Lenders and Hard Money Lenders

A hard money lender such as Paces Funding is able to provide capital quickly. Private lenders are able to do so, too, but there are differences that may make all the difference in the world.

Hard Money Lenders

Hard money lenders typically have lending criteria. For example, Paces Funding’s loan criteria for residential properties include:

  • A 6- to 12-month term
  • No prepayment penalties
  • Investments and cash-out refinances only
  • Loan-to-value ratio of up to 65 percent of the after-repaired value of the collateral
  • Rates vary depending upon collateral and loan structure
  • Borrower needs to contribute 15 percent of the project cost
  • Loan fees are typically 4 to 5 percent of the loan amount
  • Loan sizes range between $25,000 and $3 million
  • Collateral is the first lien mortgage on the real estate the loan is going toward

Private lenders are different in that the terms can vary based on each transaction, and the results are entirely based on whether you and the private lender can agree.

Credit scores do matter when you’re taking out a hard money loan, but they don’t matter as much as they would with bank financing; that’s because hard money lenders are able to look at the “big picture” and lend money on the perceived after-repair value of a house.

Do You Need a Hard Money Loan in Atlanta?

If you’re looking for a hard money loan in Atlanta, we may be able to help you.

Call us at 404-814-1644 or contact us online to find out whether you might qualify for this type of funding. In the meantime, check to ensure that you meet our loan criteria. Our loan amounts can be up to 65 percent of the after-repaired value of the collateral—and if you use the loan for renovation or construction, the loan amount can be based on the collateral’s improved value.

Read our frequently asked questions and take a few minutes to learn about the hard money loan process.