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When refinancing your property, you’re going to have a lot of questions. Do you go through a bank, or do you get a private money loan? What’s the difference? The truth is that there are very few similarities between institutional loans obtained through a bank, and a private money loan, which is obtained through individual investors.

How You Get Them

As we already mentioned, institutional loans and private money loans are obtained differently. With a traditional institutional loan, your loan is processed through a bank. This can take a lot of time because banks carefully look through your credit history to make sure your FICO score is high enough to get a loan.

With a private money loan, decisions are made much more quickly. Private money loans, also known as hard money loans, are processed through private investors. Because they are much more flexible than banks, they are able to process loans more efficiently.

Credit Score

This is the big one that is often a deciding factor for those looking to refinance their properties. For institutional loans, your FICO score is the ultimate decision maker. If you have a poor credit score, you won’t be getting a loan through a bank.

Private money lending is a great way for people to get a loan if you have credit problems. Private lenders are more focused on your property’s equity when approving real estate loans, so you are more likely to be approved. This makes private money loans much more appealing to those with poor credit or unique credit situations.

Terms and Interest Rates

Banks are notorious for cookie cutter terms. The banks don’t necessarily provide individual service when it comes to loans, so you may find yourself trapped in a situation where the terms of your loan are impossible for your unique situation.

With a private money loan, the lenders are much more flexible, so they are able to draft terms that will work with your unique situation. This makes it much easier to find a loan that will suit your needs.

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