Did you know that almost 70% of Americans say that borrowing money improved their finances? If you are considering borrowing money and are online searching “hard money lending near me” you’re in the right place. We have put together this guide to share the top benefits of taking out a hard money loan.
Read on to learn the top benefits.
Hard Money Loan 411
Before we get into the benefits and some cons of taking out a hard money loan, we want to clear up what exactly these types of loans are. They are short-term secured loans that use the property that you are trying to buy as collateral in case you default on your loan.
This type of loan is never offered by traditional banks, they are usually offered by alternative lenders like private companies, or individual investors. With a hard money loan you will jump through a lot less hoops than traditional loans.
Normally people that consider taking out a hard money loan are business owners that want to purchase commercial real estate, but don’t qualify for traditional financing.
Also, those flipping houses tend to take out hard money loans. House flippers tend to have a faster turn around time when they buy the home, fix it up, and sell for a profit.
Once they sell they can quickly pay back the hard money loan in less time than originally agreed on. Keep in mind that if this is the reason you are taking out this type of loan you read the fine print to ensure you won’t have a penalty for paying the loan back early.
Rental property investors also tend to use hard money loans. This gives them access to a quick source of cash to finalize and finance a rental property deal without having to wait weeks or months for a loan approval.
One of the main benefits of getting a hard money loan is that from start to finish this type of loan is typically faster than traditional loans. They tend to close in just a few days vs a few weeks or even months.
Another pro is that the underwriting process is a lot less intense than the underwriting in a traditional loan. The reason is that hard money lenders place a lot more weight on the value of a property that’s used as collateral vs placing it on the borrower’s finances.
One last major benefit is that a hard money lender will pay a lot less attention to the person’s credit score and to their debt-to-ratio income. This is because a hard money lender doesn’t have to follow the same regulations as a traditional lender.
When someone is not qualified enough for a traditional loan, a hard money loan is a lot more compelling. You can also find commercial hard money lenders if you are looking for money for your business.
There are a few cons that a borrower needs to keep in mind in order to make an educated decision before filling out a hard money loan application. One of the main cons is that the down payment is a lot higher than with traditional loans. The reason is that the lender is taking a much bigger risk approving this loan, so to be safe they ask for more money upfront.
Another con is that you can expect to pay more on interest rates. This is again because the lender is assuming more risks than a traditional lender. Because they are not really factoring a low credit score into the equation to approve the loan they charge more interest just to cover themselves.
One last con is that the terms tend to be a lot shorter than with traditional loans. Most typical mortgage loans can be repaid after 15 to 30 years, a hard money loan is usually only a 1-3 year repayment option term.
How to Get a Hard Money Loan
You don’t want to borrow money from just anyone or from the first lender you find. You want to make sure you take the interest rates they charge into account along with their reputation. Take your time doing homework on the lender before making any deals or signing any contracts.
Once you find a reputable lender you feel comfortable with then you will have to give them your down payment. Next, gather all the paperwork they require such as your proof of income. You might even want to consider hiring a lawyer to go over all the terms of the potential loan after you’ve been approved and before you sign the contract.
Last but not least, make a plan of how you will pay the loan off.
Please keep in mind that if you are not sure if you can afford to pay off the loan in a short period time then it is best to stay away from this type of loan. Not paying back a hard money loan can leave you in major debt and without your collateral to your name. It will also ruin your credit.
Now You Can Confidently Search “Hard Money Lending Near Me”
Now that you have learned the ins and outs of hard money lending, you can search online for “hard money lending near me” with confidence. As you can see the main bonuses of opting for a hard money loan include flexibility, speed, and convenience.
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