A Better Understanding Of Hard Money Loans

Do you know anyone who isn’t concerned about money, in one way or the other? Chances are, you don’t because most of us worry about finances. Economies are far from stable, and prices seem to only be going higher. This is why even those who do well for themselves are concerned about their future financial security. Unfortunately, a lot of people fall into debt, which can be problematic in many ways. Your credit score starts to deteriorate, and that can have serious consequences on all aspects of your life. Suddenly, you will have no choice but to take out a loan to sort your finances out, and sometimes, the only option isn’t a traditional but rather a hard money loan. Here’s what you need to know about those:

What Are Hard Money Loans?

The first and most annoying problem you face for having a bad credit score is the fact that you can’t take out loans as easily because lenders simply don’t trust your ability to pay the money back. Even if you were able to provide collateral, the process will be excruciatingly long and slow, which is not exactly ideal if you need the money urgently. This is where hard money loans come in. A hard money loan offers a more convenient way to borrow money using your property as collateral, without going through the traditional mortgage lenders, and this is why the process is significantly faster.

Who Gives Them Out?

While hard money loans used to have a bad reputation due to some shady individuals, today, you have trustworthy investors who offer this option. The loan amount will vary depending on the property you’re using as collateral, among other factors. As you can see in the article from NewSilver.com, efficiency is the biggest advantage of hard money loans. Some lenders even offer this service online! So, all you need to do is fill out an online application, and you’d be good to go. Those applications get approved within a week, unlike traditional loans which take months. This means that if you need the money right away, then this type of loan is ideal for you.

Pros of Hard Money Loans 

  1. Credit Score Doesn’t Matter

If you have a bad credit score, you can still take one of those loans to get your finances in order. This is ultimately the biggest perk of taking out hard money loans. You see, the lenders don’t really care about your credit score, they are more interested in what you have to offer for collateral. This means that your inability to repay the loan doesn’t necessarily have to get in the way of you getting the approval because if anything goes wrong, the lenders can seize your property and sell it.

  1. Flexibility 

We talked about speed and efficiency earlier, which are quite the advantages, but there’s more. Hard money loans offer significant flexibility for lenders. This type of loans doesn’t have the same rigorous agreements as with traditional ones, and lenders often deal on a case by case basis. So, you might be able to figure out a flexible payment schedule or any other benefits, which makes this whole process smoother and simpler. 

  1. Potentially More Money

A regular bank would take a million factors into consideration before settling on the loan amount, which is rarely a lot of money. Hard money lenders, on the other hand, care about the value of the property alone, which means you can take as much money as that. So, if your house is worth $750,000, you can take that money as a loan. 

Cons of Hard Money Loans

  1. Costly 

Hard money loans aren’t cheap. The interest rates are relatively high –– typically ranging from 10 to 15%. This is because, by lending you money despite your below-average credit score, the investors are taking significant risks, so the interest rates have to be high, which is something you have to take into consideration. 

  1. Short Term

Hard money loans are short-term, meaning the last from 1 to 5 years. While this may not be a disadvantage for some, it is for others. If you think about it, this is actually a good thing since the interest rates are high, so the shorter the duration, the better. However, for those who like to stretch out their loan durations, this might be a major drawback.

When it comes to hard money loans, the most important thing is finding the right lenders. So take your time and shop around because you will most likely stumble upon a few shady ones. You also need to find the best interest rates in the market, as well as additional features that might make this whole process easier for you.

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