What You Need to Know About Getting Started With Hard Money Loans
Hard money loans refer to a short-term loan that you can get from private investors secured by real estate. These loans tend to have stricter terms than those you would get from a traditional loan. Hard money loans have more lenient requirements and can be flexible when it comes to paying back and interest.
Pros and Cons of Hard Money Loans
Hard money loans are an advantageous way to fund your projects, especially if you are in a tight spot. Despite that, you need to be aware of the benefits and downsides of these loans.
Pros
- Speed
Unlike traditional loans, which need a drawn-out process to be facilitated, a hard money loan is fast. You can get this loan in a few days or weeks, depending on your terms. If you are in a tight spot, hard money loans can help you proceed faster.
- Collateral
Your property acts as the collateral for the loan. Lenders can accept other assets as collateral too.
- Flexibility
The loan’s terms are determined by you and the lender. Getting a hard money loan gives you more flexibility than you would get from banks or other lending institutions.
- Freedom
Unlike banks that will need your income statements, tax returns, and bank statements, a hard money loan lender is only interested in your assets than your credentials. It also cuts out the middleman, leaving you with more freedom to secure a loan instead of being restricted by the red tape.
Cons
Some of the downsides of hard money loans include;
- Short repayment period
These types of loans usually have a short repayment schedule, with some being between 6 months to a year. You might incur more costs with this method if you don’t have the money ready in due time.
- Interest rates
Since lenders take more risk with their loans than a bank, the interest rate tends to be higher, varying from 10-15%, with others going as high as 18%. The rates vary with different lenders, but they are usually higher than traditional loan rates.
Knowing the various benefits and drawbacks of a hard money loan should help you be better equipped and give you enough confidence. The benefits of a hard money loan; speed, flexibility, far outweigh the risks. You can get your loan faster than compared to other means and with more freedom.
