To understand why working with Arizona private money lenders is legal, you must first know that the term private money simply means that it is from a private person or group and not a bank. Banks, mortgage companies, and credit unions are called traditional lenders, while other lenders are called private or nontraditional. This does not mean that they are loan sharks or are operating a lending business outside the law.
In the case of a hard money lender, there are regulations that must be followed. But the red tape for hard money is far less than that of a traditional bank loan. And when you begin to dip into the realm of Arizona private money lenders, there are even fewer restrictions and guidelines. But these are for the lenders who are actually lending money as a business. When you get into borrowing from a family member or friend, there is really nothing that governs those transactions.
One of the biggest benefits for Arizona private money lenders that keeps them in the business is that they are free to set the interest rate as they choose and also to determine the terms of the loan such as length, fees and even what is considered to be a default on the loan. So borrowers need to be very careful about reading the entire loan document to be certain that they are in agreement with all of the terms. But most borrowers who can’t qualify for a traditional loan understand that their loan will be more expensive.
Private lenders and hard money lenders are going to require that the property being purchased is used as the collateral for the loan. This means that you provide them with the deed in their name until you repay the loan. This is all reasonable and completely legal. But remember, if you are borrowing from a favorite uncle who is giving you a great interest rate, he can also ask for the same privilege and security of having the deed in his name. So, if you don’t repay the loan, even though Uncle Bob is not in the lender business, he can take possession of the property.
Most borrowers are very sheltered and never look any further than their bank when they need a loan. But there are people who make a living borrowing money to make money. And oftentimes they borrow that money from people who are in the business of loaning money to make money. Hard money lenders, private lenders and even a loan from Grandma are all legal. And all of them have different levels of oversight and regulations that they must follow. Knowing the terms of your loan and the expectations of the lender are important on any loan but especially one from a private lender.
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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