Hard money loan is an asset-based load through which a borrower receives money based on the value of a real estate. This kind of loan is mostly obtained by realtors and investors.
Based on the definition, the amount of a hard money loan is determined by the value of a property. Borrowers who have bad credit history can more possibly obtain financing through this kind of loan.
Another benefit of this loan is a fast and easy transaction. Even those borrowers who are qualified for a traditional loan sometimes opt for a hard money loan because of the hassle-free transaction. Even if some borrowers have notable credit records they want a loan that they can get in a week's time. Once the lender determines the value of the property, the process would be easily done.
Investors who are on the flipping and rehabbing business usually avail of this loan. It is one way to get a quick financing for a property. As long as the property at hand has a resale potential, the money is good to go. Traditional lenders do not accept loans like this since it has a greater risk.
Besides investors, people who are on the brink of foreclosure can also benefit from hard money loans. The loan can give them time to either sell the property or fix their financial issues. In a case like this, the income of the borrower might be considered to secure that he or she is capable to pay back the loan.
Most private hard money lenders are investors themselves too which makes it easy for investors who want to obtain a loan to negotiate smoothly. Since both parties are on the same field, the negotiation is more flexible and efficient.
One factor of hard money loan that scares borrowers off is the high interest rates. One reason for this is that there is a greater risk of loss in this kind of loan, thus the high interest rate. However, with due thoroughness and patience, a borrower can determine whether the interest is reasonable or not based on the given situation. Research goes a long, long way. Finding the right lender who will attend to your needs takes time. Make sure to find the right one for you.
In the end, it all boils down to the convenience, reliability, amount, and terms of the loan. It wouldn't hurt to talk or contact someone who specializes on hard money loans.
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