private money lender

Are you facing a hard time trying to finance a project? Do you wish to explore a hard money loan option? If so, you must have come across a lot of information concerning hard money loans.

While it’s easy to agree with everything you hear, it is equally possible to get misleading information. For this reason, it can be quite overwhelming to sort out what’s true or fiction because there are lots of myths around the subject. But the truth is, hard money loans, available via a private money lender, are quite common. And, if you understand how to utilize them, they are effective.

To ease any concerns you may have on hard money loans, here are the most common and biggest myths that surround hard money loans.

1. Only Desperate Borrowers Take Them Out

Often, most people view borrowers who stray from the conventional lending structure as desperate. But this is not the truth. Mostly, people who seek out these loans are business owners who prefer hard money loans over traditional loans.


Because hard money loans are flexible and have a fast closing speed. On the other hand, traditional lenders take a long period to process and approve the loans. Most people will prefer to pay extra interest for the flexibility.

2. Hard Money Loans Are Costly

Its true hard money lenders charge higher interest on some loans than other traditional lenders. And the closing costs are more as well. However, to say that a loan is expensive, there are several factors you need to take into account.

The first one is time. Well, in business, time is money. And it’s pretty easy to access hard money loans, unlike the conventional ones. Also, the loans are approved fast and are short term, so in the long run, they are cost-effective than other available options.

What’s more? Although traditional lenders finance up to 50% of the entire cost, hard money lenders can offer up to 90% of the total cost. And in terms of time, operations, and money value, hard money loans are economical.

3. Hard Money Loans Have Stringent Rules

Most people refer to hard money loans as “hard money” since they are difficult to get. However, it doesn’t mean there are always strict rules and requirements. There are no general rules governing hard money loans.

And like all other loan options, different private money lenders apply different requirements and rules on their clients. For example, lender A can charge a high-interest rate while B can ask for different collateral. It all boils down to the lender and not the type of the loan.

4. Most Hard Money Loans Are Scams

Some people looking to finance their projects rarely opt for hard money loans since they tend to think that they are scams. Well, any loans, even from reputable institutions, can be scams if you rely on untrustworthy lenders. Doesn’t matter whether it’s a hard money loan lender or a conventional bank, there are risks of being duped.

Again, since private money lenders require equity in the property, most people think that there is something fishy. On the contrary, the equity isn’t a scam. Instead, it acts as a safety precaution for lenders guarding themselves against loss in case of defaults.

5. Private Money Lenders Are Loan Sharks

Again, this isn’t true. Although every bushel has few bad apples, most hard money lenders are reputable business owners. Most have successful backgrounds such as accountants, real estate developers, lawyers, or investment bankers.

More importantly, for one to run a profitable and successful money lending firm, you must know how to close loans and assess risks. These are professional businessmen and women who clearly understand how the system works.

Hard Money Loans Are a Viable Option

The idea of hard money loans may seem scary at first. But once you are past the common myths surrounding them, you will be surprised. You might even find it as a more ideal option for all your financing needs.