hard money loan

So you’ve been denied your home loan. This can be quite devastating, especially if you were attempting to attain an investment property that would actually benefit your financial situation rather than being to its detriment. Yet countless people are denied home loans each year for a number of different reasons. One of the reasons why this occurs more today than it did even two decades ago is, of course, the 2008 financial crisis. This financial crisis was based in part on the fact that banks were freely giving out loans to whoever applied, and those people were then unable to pay for their loans. This meant that the lenders ultimately lost a lot of money and needed to be bailed out to a massive degree. Now, traditional lenders are less likely to give loans out to whoever needs them and are more likely to be careful when choosing who to lend to. While this may ultimately be beneficial to them, it leaves you without the money that you need to buy your house. Unless, that is, you consider a hard money loan. What is a hard money loan, you might ask? Let’s find out.

What Is A Hard Money Loan?

Almost every loan is going to require proof that you can repay them. Very few lenders are simply going to lend to you based on trust alone. They need to see something to prove that you are a worthy borrower. For most traditional lenders, this will mean looking at your credit history, your current credit score, your current income, and more. This often can take a very long time, even if you do have everything that a traditional lender requires for approval. Furthermore, there are a lot of obstacles that can lead to you being denied. Many people today are denied because they owe quite a bit on their student loans. Even if they’re taking care of those loans slowly, they still find themselves quite often denied additional loans, simply because they have a high amount of debt. This is especially true if your income is not particularly high.

A private lender takes entirely different things into account when deciding whether or not to lend to someone. They’re largely focused on collateral, rather than your borrowing history. Essentially, if you are unable to pay back your hard money loan, the private lender is not going to be left with nothing. They will simply secure the collateral that you offered in exchange for your approval and sell it in order to recoup the money that they lost in the loan. Essentially, it’s much more important that the collateral is of value than that you have a perfect borrowing history.

What Do I Need To Know Before Applying For A Hard Money Loan?

For one thing, you need to consider whether or not you’re prepared to pay back your hard money loan or give up whatever collateral you have. If you’re not willing to surrender your collateral to hard money lenders if you can’t pay back your loan, then you shouldn’t choose a hard money loan. If you’re confident that you can pay back your loan, it’s an excellent opportunity.

Hard money lenders usually expect a down payment of roughly 30% to 40%, and they’re quite often short term loans that will last about one to five years. This isn’t necessarily a bad thing. Hard money loans do have a higher interest rate than traditional loans, typically. When you pay back your loans faster than you would with a traditional loan, you’re able to reduce the amount that you pay in interest.

What Are The Benefits Of Hard Money Loans?

Aside from the fact that hard money loans are simply more attainable than other loans, one of the main benefits of getting a hard money loan is that you can get it much faster than you would get a traditional loan. Furthermore, hard money loans are often more flexible, allowing you repayment options and wiggle room that you may not get with a traditional loan.

Hard money loans aren’t for everyone, but they could be for you. Consult with a private lender to see if they’re the right options for you!