For real estate investors looking for an alternative way to get funding for a property deal, hard money loans and private loans are two options. While the two have similarities, there are a few differences that every borrower/investor must understand. So, why is Alpha Tech Lending no longer hard money and what’s the difference between hard money vs. private lender?
What is a hard money loan?
A hard money loan is a short-term loan that the lenders provide to those investing in real estate in various capacities. The borrowers could be looking for rental properties, land purchases, fix and flip properties, or building from the ground up. Many hard money lenders also provide loans for residential and commercial real estate projects. They use the asset value to decide the loan amount and the rate, which means the hard cash lender uses the property as collateral for the loan.
What is a private money lender?
As the name suggests, a private lender can be an individual or an entity that provides loans on their individual terms. They have no binding rules and follow their instincts when deciding whether to approve a loan.
Like the hard cash lender, private lenders are less concerned with the borrower's financial history and offer asset-based loans.
Hard cash lenders are organized lenders and have the license to lend money, whereas private lenders do not have a license to lend money.
However, the private lenders have a trade organization National Private Lenders Association (NPLA), initiated to protect the interests of private money lenders, but more on that later.
A private lender will be someone who will have more interest in lending to known people, say a family member or long-associated family friends. They have the money to help fund their acquaintances to acquire property. The interest they may charge will largely depend on their association with the borrower. That will be one advantage when you compare private lenders vs. hard money.
Hard money lenders can be higher in their interest rates as they use several sources for money. Sometimes, they borrow from private individuals at varying interest rates, so they usually charge high-interest rates to their customers.
What is the National Private Lenders Association (NPLA)?
Alpha Tech Lending is a full-fledged private lender actively helping individuals achieve their dream homes and helping investors complete projects. We are one of the founding members of the National Private Lenders Association (NPLA).
As you would understand by now, because of a few similarities, people often confuse hard money lenders and private lenders thinking they are the same. Our objective and purpose here is to distinguish ourselves from the phrase "hard money." Customers mistook us as hard lenders, which hit our reputation in the market.
The biggest reason why investors are attracted to hard money lenders is because the process is quick and straight. Give the asset your collateral, and do not worry about your credit history, experience, exit strategy, and other considerations that banks and financial institutions usually consider.
However, many investors are kept in the dark regarding the sources from where the hard money lenders get their capital. Private lenders do not resort to such borrowings. We belong to a more polished and refined market and use our money to help genuine investors.
As we said earlier, a few like-minded private lenders set up NPLA to protect our business identity. We will continue with our goal of eliminating the phrase Hard Money and replacing it with gentler terms like Transactional Funding, Bridge Lending, or Private Lending.
About Alpha Tech Lending
Alpha Tech Lending is a trusted nationwide private money lender, who primarily operates on the east coast and a few key states in the south. We have been in the private lending sector for 30+ years and offer a variety of loan programs that are customizable to suit your real estate investment needs.
When you partner with Alpha, you get a consultant and a capital provider who is here to help you grow and succeed.