If you’re asking yourself, “what are hard money loans?” then you’ve come to the right place. A hard money loan is a specific type of loan which is backed by real estate or other physical assets. These loans are usually used by individuals or businesses who are unable to obtain traditional financing through banks or other lending institutions. Hard money loans are often used to finance short-term needs, such as property repairs or renovations, or to bridge the gap between the sale of one property and the purchase of another. The terms and conditions of hard money loans can vary depending on the lender, but they typically involve higher interest rates and shorter repayment periods than traditional loans. In order to qualify for a hard money loan, borrowers must typically be able to provide documentation of their assets and their ability to repay the loan.
How do you qualify for a hard money loan?
There are a few key qualifiers for a hard money loan. The borrower needs to have good credit, but more importantly, they need to have a strong asset as collateral. The property being used as collateral needs to be worth significantly more than the loan amount being requested. This is to ensure that the lender is protected in the event that the borrower defaults on the loan. Hard money loans are typically used for short-term financing needs, such as property repairs or renovations. For example, let’s say that you need to hire experts at Beautiful Bath Pro to update your new home’s bathrooms. You can benefit from a hard money loan to pay for expenses that come with being a new homeowner. Whether you’re planning for a bathroom remodel or shower conversion, getting your finances in order is the first step when owning property.
The interest rates on hard money loans are also typically higher than traditional types of loans, but they can be a more affordable option than a personal loan or credit card. If you are interested in applying for a hard money loan, it’s important to do your research and compare interest rates and terms from multiple lenders. This will help you find the best option for your specific needs.
What are the benefits of a hard money loan?
There are a number of benefits to obtaining a hard money loan which includes:
- Speed of Funding: One of the biggest benefits of a hard money loan is the speed of funding. Because the loan is based on the value of the property rather than on the credit history or income of the borrower, the loan can be approved and funded in a matter of days, rather than weeks or months.
- Flexibility: Hard money loans are much more flexible than traditional loans. They can be used for a variety of purposes, including purchasing and renovating a property, refinancing an existing loan, or consolidating debt.
- Low Rates: Hard money loans typically have lower interest rates than traditional loans. This is because the risk to the lender is lower since the property is the collateral for the loan.
- No Pre-payment Penalty: Unlike traditional loans, there is no pre-payment penalty for paying off a hard money loan early. This allows borrowers to save on interest costs if they are able to pay off the loan sooner than expected.
- Easier to Qualify: Because the loan is based on the value of the property rather than on the credit history or income of the borrower, it’s often easier to qualify for a hard money loan than for a traditional loan. This makes it a good option for borrowers who have difficulty obtaining a traditional loan.