Top 5 Advantages of Hard Money Loans
Hard money loans refer to financing provided by non-institutional lenders. There are many hard money lenders that offer quick financing at attractive interest rates.
As a borrower, you will need to do a thorough background check on the lender’s reputation and business, but as you do your research, you will find that hard money lenders can provide a great advantage in your quest to finance your real estate investment project.
Advantages of hard money loans
- Faster approvals: Undoubtedly, one of the main advantages of a hard money loan is the fact that investors can secure the pre-approval within a day or two, given that they have submitted the few documents that the lender has requested. Hard money lenders mainly focus on whether the asset itself has a good market value and whether the borrower’s equity is at least 20%. Funding can be done in less than a week compared to normal loans that can take a month or even longer. When inquiring about hard money lenders, a key question to ask is how quickly they can fund.
- Flexible Payments: With a private lender, you’ll have more freedom to create a customized repayment plan. With a large financial institution, you won’t have that freedom. Instead, you will have to accept the payment terms set by the bank. However, with a private lender, you can discuss and come to a mutually agreeable repayment plan that you feel is right for you.
- Fewer requirements: When you apply for a loan from a normal financial institution, you will be expected to meet very tough requirements such as income history, experience, etc. It’s no secret that bank approvals can become a cumbersome process. You probably won’t be saddled with as many requirements from a hard-line lender. As long as you have a high-value asset with at least 20% equity in it, there’s a good chance you’ll qualify for a loan.
- Zero Prepayment Penalties: If you get a loan from an established bank, you may be subject to prepayment penalties if you repay the loan before the due date. Most fixed and reverse payday lenders don’t charge prepayment penalties, so if you come across extra cash and decide to pay off your loan before the due date, you can confidently do so without worrying about being penalized for doing so.
- Credit history is not a big issue: In the case of major lending institutions, your credit history can have a huge impact on whether you get a loan or not. Private lenders place less emphasis on poor credit history. This is because a private lender bases the loan approval on the value of the property, the borrower’s equity, etc. As long as you meet these criteria, you have a good chance of getting funding.
An added bonus of getting a loan from a hard money lender is that as more properties in the community are renovated, property values are expected to increase and the quality of the neighborhood will improve.
#Top #Advantages #Hard #Money #Loans