Banks Use Every Reason to Decline Loans – Private Money Lenders Are Good Option For Borrowers
A lot of people have experienced how hard it is to obtain a bank loan. Bank underwriting criteria in today’s lending environment is almost unbearable. There are a lot of loan brokers that have shared their stories with me recently about their borrowers having a perfect credit score, good assets, and excellent income but still having difficulty obtaining a bank loan. For this reason, more people are on the hunt for hard money loans or private money loans than ever before. These loans are needed for investors to take advantage of fleeting opportunities or for some of them to make a new start after losing everything. (What is a hard money loan? Read about the 5 most common questions that people have about hard money loans here)
Those who previously thought they would never need a hard money loan, are now resorting to private money loans in order to seek out new opportunities or to get themselves out of distressed circumstances. The high interest rates charged by hard money lenders are always a source of contention for both mortgage brokers and borrowers, who are enticed by the articially low, interest rates available to those who qualify.
Hard money loan interest rates are not governed by the same rules as mortgage loan rates. Non-bank loan interest rates are governed more by supply and demand and by competition among lenders for loans. And as more and more private money lenders pull money out of other investments and use it to make hard money loans, interest rates charged on non-bank loans will gradually get lower, and lower. Until then, borrowers who need loans will need to use hard money loans and pay higher interest rates until banks open up their tight lending requirements again.
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Posted by Corey Curwick on October 12, 2012