Lending 101: Check The Basics Of Hard Money Loans Here!
Getting a quick loan for real estate needs is not always easy. Most traditional lenders and banks are interested in knowing the creditworthiness of the borrower. So, they would be checking the income of the applicant, credit history and other details, and even with a solid background, the process can be time consuming, and that’s exactly where hard money lenders come in the picture. In this post, we are discussing more on what hard money loans are all about and if you should consider the option.
What exactly is a hard money loan?
A hard money loan is a short-term loan, which is typically shelled for real estate investments. It is also considered to be a bridge loan, and often, property flippers use these loans to renovate and sell and property within a year. In this case, the property works as the collateral for getting the loan, so the lender doesn’t want to know about the credit history of the borrower. In case the loan is not repaid on time, the lender will take over the property, sell it and make their money. To be more precise, the value of the collateral real estate property is more critical than the credit standing of the applicant. Terms of hard money loans don’t extend beyond five years, but most people take these loans for a year or two.
Benefits at a glance
Since hard money loans can be expensive, most people have confusions about the viability of such a lending option. One of the foremost advantages of these loans is the application process. These loans can be closed easily, and you don’t have to bother about the lengthy process that is common with traditional lenders. There is no need to verify bank statements, income or anything else, and these loans are more flexible in certain ways. Each case will be checked and evaluated independently, and the repayment schedules can be adjusted as per your needs. The lender is just interested in knowing if the property is worth more than the value of the loan. In more effective words, you need an asset to secure a hard money loan.
On the flip side, hard money loans come with a high interest rate, and your property is at stake. Be absolutely sure of what you want to do with the money before you get into the application process. Used rightly, this could be a great form of lending.