Hard Money Loans

Hard Money Loan

When you are in urgent need of money and you cannot afford to wait for a traditional loan to be approved, hard money loan is a good option for you to get immediate cash that will bail you out of a financially distressed situation.

There are various situations where Hard Money loans can come to your aid. This loan is generally referred to as the “loan of last resort,” where the financing is usually done based on your assets. If you have a real estate property, you can obtain this loan based on the current market value of the property.

Hard money loans are similar to the popular bridge loans. The cost of the loan for the borrower, and the money lending criteria are the same for hard money loans and bridge loans. The interest rate is also high for both these loans. But, the major difference is that bridge loans are offered for temporary periods with the new home as collateral, whereas a hard money loan may be offered even to someone who is completely bankrupt and in a severely financially distressed situation.

You cannot obtain a hard money loan from a bank, because loan terms and conditions in banks are very stringent. Look for hard money loan from individuals who usually offer it in their own geographical area. You can get around 70% of your property value as a hard money loan.

What you need to know about hard money loans

• It can be either short term or long term, depending on the value of your property and your requirement.
• It is perhaps the only option open to you when you are severely financially distressed.
• Since private lenders offer the loan, there are no specific rules for this loan. Rules and terms vary among individual lenders.
• As the lender is taking a huge risk, you will have to bear strict terms and conditions to get the loan amount.
• The interest rate ranges from 12% to 20%, depending on your loan amount.
•  The minimum duration is 6 months and the maximum could extend up to few years.
• You must be accurate in paying the monthly interests, because that is the only way you can develop trust with the lender.
• The closing cost of hard money loan varies between 2 to 10 points.

Why opt for Hard Money loan?

Hard money loans are ideal for beginner investors who find it difficult to raise the seed capital. Suppose you need to fund a new business and you are finding it difficult to arrange for the initial funds. If you have some property, it can be used as collateral to get a hard money loan immediately. Real estate investors also opt for hard money loans when they want to buy property, fix it up and sell it at a higher price in the market.

Before finalizing on the lender, do your homework. Shop around to find the best deal because terms and conditions vary among hard money lenders. Try and find the best deal and also be mindful of scams.