Finding a reliable source of loan is not an easy job, especially in this era when banks taking more strict rules and regulations. However, you should remember that always a way opens a door to reach the goal even in a difficult situation. In the sector of quick loans, hard money is that way. Basically, a hard money loan is a way of fast financing covered by a property. A good understanding how this loan program differs from others will surely help you understand if it is an exact option for your needs or not.
There are many different types of loan options are available that can help home owners or business owners with their financial needs such as SBA 7a loans or conventional loans. But one of the rarely used loan types is a hard money loan. Even it is less common than a traditional mortgage loan, it can be valuable tools when utilized in the exact situation.
What is a Hard Money Loan?
Basically, a hard money loan is a short term loan option to fulfil quick financial needs or financing needs of the debtor after being denied by the traditional lenders or banks. Also, hard money loans are very famous for having very limited underwriting requirements. You don't need to show a good credit score because these loans are covered by your property not based on your credit history. Hard money funds tend to have LTV or lower to value ratios because lenders use the property itself as their protection against any default case.
Find out a Hard Money Lender
Finding a good hard money lender is not an easy work. It takes several times to find out an appropriate option. Basically, traditional lenders do not offer hard money options among their big list of loan programs. An average debtor may find it hard to find this type of financing as easy a traditional loans like an SBA loans. Before applying for a hard money fund you should remember that a private investor and lending company who specializes in hard money and other non-traditional financing programs are the ultimate options for this type of financing.
Traditional Uses for Hard Money Loans
A hard money loan has many uses. Debtors use a hard fund for many purposes. However, many common uses of hard money are available such as purchase loan, blanket loan, bridge loan, fix and flip, renovation, construction, and much more. Generally, many other different purposes are available.
Advantages of Hard Money Loans
Disadvantages
With some biggest advantages, there have some disadvantages with hard money fund. The higher interest rate is the biggest disadvantage of hard money loans. Even the rates are higher than any traditional loans. But there also has reasons for that, basically, the interest rates are higher because of the underwriting standards are less strict as well as you can get the loan approbation on much smaller notice. One more drawback is that the loan program comes with an upfront origination fee of 1%-4% of the loan. Basically, the fees are dependable on the lender you work with.
At the Time Traditional Method Are Not Working
If the traditional loan methods like SBA loans, conventional loans are not working, a hard money loan could be a useful option in helping you grab them when you are faced with problems through more traditional lending methods. Select a hard money can be one of the best as well as easiest ways to obtain, renovate and maintain property especially for investment. You should remember the drawbacks and benefits. It will help you to choose the right option at the next time you are in the market for a loan.
