Private loans are popular. The reasons can be carried but all can be resumed by the fact that private loans don’t lack the flexibility that traditional loans do.

As the name indicates, private mortgage loans are offered by private lenders. Private mortgage loan systems have carved a niche for itself even when traditional financing sources (banks, lending institutions, and government agencies) play major roles in the financial enterprise.

Private mortgages: The concept

Private mortgage loans – a loan where funds can be sourced either from a business or a person rather than from the bank. These loans are usually short-term hard money or asset-based loans.

The amount of loan depends upon the equity and value of the property you put as collateral. If you are the one who doesn’t want to go for a conventional loan, then you can easily take advantage of a private mortgage loan. These loans are found to be an extreme source of funding, especially for professional real estate investors.

One of the main advantages of private mortgage loans is that they are easily processed, secure, and saves a lot of time. But, the rate of interest in the private mortgage loan is higher (14% to 18%). Whereas, the rate of interest in a conventional mortgage loan is usually lower (7% to 10%).

Loan flexibility:

So what are the reasons behind the increasing popularity of private mortgage loans?  The first and foremost reason is the speedy manner in which the loan application approval is handled. The second reason is its fast accessibility. A private loan can be accessed within ten days while conventional loan takes 45 to 90 days.

What else?

Conventional loans take more time as institutional lenders first need to examine the borrower’s credit history, obtain an appraisal of property’s value, and evaluate the financial status of the borrower. On the other hand, private loans can be quickly accessed as the property itself is the main criterion that is used to determine loan eligibility. Also, a private lender can decide within a day, whereas traditional mortgage loans need to be approved by a loan committee before any further execution.