LoanNow: a Better Option than Private Loans
For most people, private loans are just that – private. A private loan lender is a friend or family member. One friend may spot another 20 bucks or a parent may help an adult child finance a home or a car. These loans are often executed with nothing more formal than a handshake or a hug.
But commercial private loans are an entirely different animal. A private money loan often represents the last hope for an individual struggling to get approved for a loan due to poor credit and low FICO scores. In fact, for homeowners with bad credit, a hard loan obtained through commercial private lending often represents one of the few available means of obtaining credit.
But for many of those borrowers, a loan from LoanNow represents a better option than a private loan lender for obtaining the cash they need – without the shortcomings associate with private lending, and without putting their homes on the line.
Private lending between friends and family members can range from a quick 20 dollar loan between two buddies to a 40,000 dollar down payment on a house provided by a parent to an adult child. In many cases, such loans are executed without any sort of written agreement. However, misunderstandings are bound to occur if both parties are not on the same page about when and how loans are to be repaid. And if the borrower cannot or refuses to repay the loan at all, relationships can be strained beyond the breaking point.
It just makes sense to consider your friend or family member as a private loan lender. Having a written agreement in place spelling out the terms of the loan can minimize misunderstandings that often plague private loans, especially if repayment doesn’t take place in a timely manner.
While it’s not a bad idea to consult with an attorney, especially for large loans, the agreement itself doesn’t need to be stuffed with legalese and printed on parchment. A typed or printed document stating the amount of the loan and the repayment terms and signed by both lender and borrower will suffice.
What Are Hard Money Loans?
For homeowners with bad credit, obtaining mortgage refinancing from banks is frequently an exercise in frustration. In desperation, many seek Loans made through commercial private lending venues known as hard money loans. However, the underwriting flexibility associated with private money lending comes with several undesirable conditions attached that almost never occur with loans between family members or friends.
Like home equity loans and home equity lines of credit (HELOCs), hard money loans represent a form of mortgage refinancing. Most commercial loans are based on the equity accumulated by homeowners. Hard money loans are also based on the value of a home or piece of property. However, unlike home equity loans and HELOCs, which are based on pure equity, hard money loans are calculated using the After Repair Value or ARV.
Let’s say your home is worth 180,000 dollars but needs 10,000 dollars in repairs. Once you have the repairs done your home is worth 200,000 dollars. That’s the ARV. Hard money loans made through private lending typically cover about 70 percent of the ARV, with interest rates that range from 10 to 20 percent. On a home with an ARV of 200,000 dollars, the resulting private loan would total only about 140,000 dollars.
Unlike equity-based loans made to borrowers with good credit, hard money loans also often carry 1 to 2 points in addition to the interest charged. On a 140,000 dollar loan, 2 points equals 2,800 dollars. A private loan lender often adds closing costs and administrative fees that also drive up the total amount of the loan. It should be obvious by now that unlike private loans between individuals who know and care about each other, commercial private loans are far from friendly transactions.
If you’re a homeowner with bad credit shopping around for commercial private loans, you may think a private loan lender is your only option for a loan to refinance your home. But before you put your home on the line with a private money lender, maybe you should reconsider – and check out the possibility of getting an unsecured personal loan from LoanNow.
Even if your credit isn’t perfect, we may be able to approve you. We look beyond FICO scores to consider your whole financial profile, and we often approve borrowers who have been turned down by banks. With LoanNow, there’s no need to calculate ARV or closing costs. We also never require collateral – and LoanNow never adds points or other hidden fees to your loan. With LoanNow, you get the money you need – without putting your house on the line. Discover for yourself why so many savvy borrowers have made LoanNow their go-to lender.