There are plenty of myths about hard money loans and this could be stopping you from getting benefits out of your loan. Maybe you are afraid to consider a hard money loan for your investment needs. It is time to take a closer look at these myths and learn the facts about these loans.
Hard money lenders are not reliable
Contrary to beliefs, hard money lenders are not shady people who offer loans under inscrutable terms. Rather they are individuals as well as groups that offer their own capital as a loan. Some lenders may borrow loans from banks even, to get you the capital you need. Their services are indispensable for people who want to invest in property but for some reason cannot find a good loan from a bank. As with any lender, you need to research their background and their loan terms to find the best lender.
Hard money loans are used primarily by people with low credit score
It is true that when you have a low credit score, most traditional lenders may refuse to offer a loan to you. Therefore, you might want to approach a hard money lender. However, these are not the only borrowers who use hard money loans. These loans can be used by any investor who owns or wants to invest in property. Also, while hard money lenders are less likely to be influenced by your credit score, they do want to ensure that your property will offer good returns. Thus, they will give you a loan once they are sure that the property will generate revenue or profit on renovation, rent, or sale.
Hard money loans are expensive
While hard money loans do have higher interest rates than bank loans, investors consider this worth the benefits offered. A hard money loan is processed within a few days, as opposed to a bank loan that can take weeks to be approved. This ensures that investors do not miss any good opportunities. If you have spotted a good property on sale, and want to buy it fast, you might as well pay a higher rate of interest than lose the property to another buyer. Also, during the time that the property is not generating revenue, you can pay only the interest.
Hard money lenders have tough conditions
Hard money lenders are also investors in property so they want to maximize their revenues. They have more customization choices for every borrower once they spot a good investment. If your investment is sound, you will find more moderate loan conditions. Also, if you are unable to make repayments temporarily, for any reason, you can negotiate with the lender for more leeway. As long as the lender is sure you can clear your debt, you will find them easy to work with.
It is difficult to get a hard money loan
Hard money loans are approved quickly. Also, the property is the collateral, and often, the only consideration. As long as you have a good investment in form of property, you can easily get a hard money loan.