Loan Blogger

Private Money Lending

Private money Lenders earn their money by making loans and providing loan services to individuals who need private money (loans secured by real estate.) There are generally two types of private money professionals, direct lenders and brokers. Most private money lenders are, in actuality brokers. There are also private money professionals who are direct lenders and brokers. In these circumstances, the individual usually will fund only one or two small loans each year and acts as a broker to clients for the rest of the loans that come through the door.

Deciding if you would like to seek the services a private money broker or a private money lender is much like choosing whether to purchase real estate with the help of a realtor or whether to write an offer directly to the seller, representing yourself in the transaction.

Benefits Of Using A Direct Private Money Lender

The benefits of working directly with a direct private money investor are clear on the surface: you save money by cutting out the middle man. Brokers are compensated for their time and effort by charging points on the loan transaction, often times in addition to the points the end investor charges. Because of this, the more brokers you have in a given transaction, the more the money is going to cost you when everything is said and done.

If you have been lucky enough to find a private money investor directly who is willing to fund your particular transaction, you will be able to talk with the investor or lender directly, and will be able to get all of your inforamtion straight from the horses mouth. This can be both good and bad.

By dealing with the direct lender, you can be assured that you are getting your updates and information first hand, and this can allow you to close your transaction with less problems or delays. After all, no one knows your scenario like you do, no one else can explain any potential negatives to your transaction better than you might be able to, and no one knows the benefits that the transaction will bring like you do. The down side to this, however, is working with the private money investor directly means that your loan either funds or it doesn’t, there are no other options if the direct lender turns you down, except to go back to calling around for another direct lender that happens to like your particular transaction.

Benefits of Working With a Broker

The upside of working with a broker is also easy to see: a good broker will be well seasoned and will have already built the relationships with the direct investors with whom your private money loan will fit, saving you a lot of time and legwork. Having a broker work with you will give you the help you need to properly package your loan, improving the chances that you are able to obtain the loan you need at the rate and term that work for you in the least amount of time without the need for you to stress and continue to look and present your deal to investors you do now know. Working with a broker will enable you to get through the application process and get it to the correct private hard money lenders for your particular situation. Having a good broker will save you time and trouble in financing the transaction and be well worth the slightly higher cost.

At the end of the day, your decision to work with a good, quality broker or directly with a hard private money investor will depend on whether or not you have a relationship with a direct private investor and whether or not you want to present your scenario directly without the aid of a professional.