Most people who want to advance towards financial stability need to borrow some money from time to time. Unfortunately for people who have fallen into tough times and defaulted on loans in the past, getting financing from mainstream financial institutions is hard.

Default or late loan payments result in bad credit ratings. The traditional financial institutions usually have very rigid policies. Due to these policies, lousy credit rating often sounds a death knell to your creditworthiness as far as they are concerned.

This state of affairs means that the 68 million Americans who have bad credit ratings may be locked out of mainstream financing. If they are not locked out, they get funding under appalling conditions. Even when you have a good credit rating, you may want to raise money faster than a conventional lender would give you. The following are some things you need to know about hard money loans.


1. They Are Processed Relatively Quickly

There are instances when banks can approve a loan for a person with a bad rating. A lot of consultations are needed for the approval to happen. Time is of the essence when borrowing because the need for which you are borrowing will not wait.

A hard money loan has a short turnaround time. The loan can take a few days or a few weeks, depending on whether you have a working relationship with the private money lenders from whom you are borrowing from. Other factors that may impact on the turnaround time for your private loan include the value of the collateral and the time taken for due diligence.

2. They Are Flexible

The process of approving these loans is different from the one used by conventional institutions. The repayment period for hard money personal loans is also adjustable. This flexibility of terms is because private money lenders are usually small companies and sometimes individuals. Their small size makes it possible for you to negotiate terms with them.

3. Value of the Property You Want To Buy Determines Amount Loaned

Most of the people who take hard money loans are in the real estate business. You don’t need to worry too much about how much money you make when borrowing a hard money loan. The value of the property will inform the amount of money you get from the financier. The flexibility makes it possible for people who would otherwise be locked out to get loans.

If you are looking to get a hard money loan, the following are some factors to consider.

Experience of the Lender

The process of getting a hard money loan can be a bit complicated, especially when you want a bad credit loan. Seeing that time is of the essence, you need a team that can help you jump through the hoops quickly. This kind of ability comes from having the experience, and so you should seek to borrow from an experienced lender.

Use a Local Lender

As earlier observed, the value of the property against which you are borrowing is critical to the amount of money you will get. Often the lender will want to see the property and have it valued before they can decide how much they can lend you. If the property is in Sacramento, then you need to talk to hard money lenders Sacramento Ca since those from further out may take too long to process the loan.

In Conclusion

Hard money loan lenders don’t give you the entire amount necessary for you to buy the property you want. The standard loan to value ratio is about 80%. This ratio means you can only get 80% of the value of the property against which you are borrowing. You, therefore, have to be able to raise the remaining 20% from other sources. These hard money loans are usually best suited for short term borrowing as their interest rates average about 14%.