No matter what the project, deciding whether to borrow from a family member or a hard money lender can be a difficult choice.
Whether you’re interested in purchasing property, fixing & flipping, or developing a project from the ground up, your success depends not only upon the sum of money you can borrow, but also upon the quality of your lender.
And while borrowing from a family member may seem like a simple solution to a complex problem, there are a number of pitfalls that many borrowers fail to consider.
1. Speed & Ease of Borrowing
People often think that borrowing from family members will get them easier and faster financing. And on the surface, it makes sense.
However, while securing a loan from a family member may seem easy, it comes with a huge amount of risk. Family members often lack the financial know-how to set you up for success, and have neither the experience nor the range of offerings of a qualified lending institution. Plus, family loans often come with strings attached, and should you run into any issues with repayment, you risk ruining a relationship with a loved one.
Hard money loans, on the other hand, can actually be much faster and easier than most people think. Applying for a loan is simple, and your application can be processed in minutes or hours. Lenders work with you to make sure you’re equipped with the knowledge and resources to succeed, and can be prepared to close in a matter of days.
Ultimately, hard money lenders will work with you, taking the same amount of time to make a smarter and more secure investment than you’d be able to receive from a family member.
Qualifying for a loan can seem like a daunting task, especially if your credit score is less than perfect. So, instead of turning to a financial institution, you might consider borrowing from a family member - someone who is more likely to overlook your credit score.
But that’s a common misconception about hard money lenders. Qualifying for a loan is more dependent on your project and equity than on your credit score. In fact, in most scenarios a less-than-perfect credit score is not an obstacle to securing financing for your upcoming project. What’s more, hard money lenders can look at your property for its potential rather than its current condition, which means more value and more opportunity to you as a borrower.
Odds are, nobody in your family has decades of experience investing in the growth and transformation of property. And that’s exactly what a qualified and experienced financial lending institution brings to the table.
In the 20 years Bobby Montagne, the CEO of Walnut Street Finance, has been investing in property, we’ve made the borrowing process fast, easy, and effective. Plus, we offer a range of financial products to help you meet your goals. When you borrow from us, you’re borrowing from someone who knows your objectives and has your best interests in mind. Chances are, we’ve probably even funded a project or two in your neighborhood.
The reality is, there are a ton of options when it comes to financing your investment property. But a hard money lender will always be a safer, smarter, and ultimately more lucrative option than borrowing from a family member.