If you have ever applied for a mortgage, you probably know of the complications and extensive paperwork involved. Banks and lenders are interested in knowing your credit score, your debts, and everything else related to the income, to be fully assured that you can repay the loan as per schedule. Sometimes, it is impossible to wait for traditional lending. All you need is fast cash without fuss, and hard money lenders offer exactly that. A hard money loan is typically shelled out for real estate needs, and in this case, the lender wants to know the value of the property that serves as the collateral and not your income.
Why consider hard money loans?
First and foremost, you can get hard money loans without a great credit background, and that’s a huge advantage, especially for people who don’t have the necessary income but enough assets. The loan application process can be closed quickly, and the requirements are not that extensive. Hard money lenders have different expectations, but you can still get the loan. Also, hard money loans are flexible, so you can choose to opt for a term of one year to up to five years. This form of lending is great for investors, property flippers who want to find fast funding. A hard money loan is also called a bridge loan, simply because it bridges the gap before one can sell off the property they have, for the one they intend to buy.
Facts to understand
To start off, hard money loans are not cheap. You have to pay a steep interest rate, often as much as 15% APR, and that can be a matter of concern, if you choose to extend the term. When it comes to such loans, the sooner you pay off, the better. It is also important to understand that your asset is at stake here, so you need to be completely sure that you can repay the loan on time, or else, it would mean losing out on the collateral. Most lenders are extremely particular about the terms, so ensure that you are well aware of the consequences and have a plan for repayment.
There is no denying that hard money loans are flexible and easy to get, but fast lending is expensive, so it has to be a decision based on the investment goals. Check online for hard money lenders now and discuss your needs.