Lender Differences

What is the difference between a Private Money Lender and a Hard Money Lender?

People tend to use the terms “Private Money Lender” and “Hard Money Lender” interchangeably.  But there is a distinct difference, and it’s important to understand how each of these lenders work to find the loan product that best fits your specific financial needs.

Private Money Lender:

The term “Private Money Lender” generally refers to funding that comes from a “private” source, not an institutional bank.

Borrower focused: Takes into account client experience, expertise, cash, credit, and income to be awarded the loan. They do not just rely on collateral.

Works with clients who have generally good credit history or an A-credit rating: Individuals have the resources to pay off the loan when the rehab project is complete.

Flexible loan terms and pricing: The lender can be creative with the terms/points/interest rate packages they put together for each individual loan. Once a client has a history of success, the lender can be even more flexible with the loan terms and pricing.

Hard Money Lender:

The term “Hard Money” refers to the “hard” asset that you use as collateral for the loan. In the case of a real estate investor, the “hard” asset is the property you are purchasing with the loan.

Asset focused: Client experience is not the focal point as long as they put up their property as collateral against the loan.

Works with clients who have less than perfect credit or who don’t have a lot of cash on hand.

Structured loan terms and pricing: The lender has time-tested loan packages with specific terms/points/interest rate combos that work well for many clients. Hard Money loans typically have higher rates than private money loans.

RFG is eager to help clients move forward with their real estate investment goals.  We provide competitive rates, interest-only payments, and no pre-payment penalties or fees.  The bottom line is we structure our loans so that you can be successful.  That’s why more and more real estate investors choose RFG as their only source for rehab funding.