There are several money loan types that can appeal to the borrower for different reasons, and a private money mortgage loan is one of them. A private money mortgage loan is one that is not funded by banks or commercial companies; rather, they are funded by private money lenders such as individuals, trusts, partnerships, real estate investors and retirement funds.
These are loans offered at a higher interest rate to those who are having problems with mortgage payment, possible foreclosure, past or current credit issues, seeking investment in commercial property, need financing for construction or to close quickly on a deal that may not wait for a conventional loan. In other words, a private mortgage money loan is a quick fix to a financial problem that cannot be resolved in any other way.
With the high risk involved in the loan, there is a higher price to pay. Interest rates will be more than a conventional loan, but the reward outweighs the alternative. A good example of this is a foreclosure, where the borrower runs the risk of losing his or her home.
Private Money Commercial Loans
A private money commercial loan assists businesses with a bail out of a possible foreclosure (although it can be used for other reasons as well). Private money commercial loans are best suited for business that are losing money or have a poor credit history. As with other private money loan types, a private money commercial loan is financed by private entities because of the high risk involved that makes it difficult for a commercial lender to approve. Also, the interest rate will be higher with a private money commercial loan because of the high risk.
Commercial lenders tend to run an interest rate of around 7% to 8%, and a private money commercial loan can be found in the range between 11% and 15%. A private money commercial loan will use the business as collateral, but the loan can be extended to as long as three years, so it can be paid on a gradual basis. More often, the term of the loan will be less, more in the area of 12 to 24 months. The whole purpose is to save the business rather than allow it to go into foreclosure.
Are you in need of a quick loan but your credit score is less than perfect? Private money lender will often disregard your credit history when reviewing your loan application. Their guidelines are different and more accessible than conventional lenders.