There are many different ways to get a loan for your
new business. This article is going to give you the pros and cons of applying
for hard money loans.
Hard money loans are a great option when you are thinking
about borrowing money for your business or new property. Like most things it
has its drawbacks. Hard money loans
are great if you are denied a loan from a bank. While most loans usually take a
long time to get approved, hard money loans are turned around quickly.
Hard money loans are classified as loans that are given by
a private company. Traditional loans from banks take longer because they are
interested in how you can repay the loan back. For example, if your credit
score is not great it may take some convincing to receive your loan. The same
goes for your job; if you are a freelancer, for example, a bank may not view
your profession as reliable.
When it comes to hard money loans, however, they really are not worried about that. Lenders are
more interested in what you already have. Collateral is taken into
consideration when you are applying for a loan from a private company. If you
cannot pay your loan off, then your collateral is taken and sold off to cover your
debt. The value of your collateral is taken into consideration more than your
credit score or job.
Many people favor a hard money loan because of its short duration. Usually, these loans
last one to five years. For those of you who are in the fix and flip business,
this type of loan would be very beneficial to you. Say you find a property fix
it up and then rent it out to a few tenants. After a short period of time, the
money you receive from the property can be used to repay your loan.
Here is the crux of hard money loans
So far hard money loans have been the best option for someone to get the money they
need quickly. Usually, lenders do not care too much about your credit status or
how money you have. Getting approved all around much easier than going the
traditional route. So what are the cons of a hard money loan? Well, the biggest one is the cost of the loan
itself. As stated these loans are slated for a short amount of time. This means
the interest rate that you have to pay is high than one from a bank. Usually,
the APR is over 10%.
Also, your credit may be something you have to worry
about. You may be thinking, “but you just said it may not matter.” In most
cases it won’t, however, some lenders may pull your credit report to see if you
have red flags. Most of the time this does not happen but you want to make sure
you do your research with all the companies you are considering.
Bottom Line: Are Hard Money Loans Worth It?
In short depending on your property and what you want
to do with it, yes. If you see a great property that is in a great location
that you believe can turn a great profit fast, this is something you want to
do. Most properties that are in great locations are bought quickly if you do
not have the liquid assets this is a great option for you. Always make sure to
weigh the pros and cons of any loan that you are thinking of applying for.
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true.
Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.