Hard Money Loans- Advantages and Disadvantages


Hard money loans- what are they? Hard money loan is an asset based loan. That’s opposed to a borrower based loan in which banks want to focus on you because you are the borrower. They want to see that you have got a good job and that you have got good credit. You need to prove to them that you have an income. All this information can take several weeks to put together. Hard money lenders, on the other hand, are not focused on you. They are focused on the asset that secures the loan. Hard money lenders are typically private individuals as opposed to regulated institutions like banks. And there are some advantages and disadvantages that you need to know so that you can use hard money as an advantage in your life.

So, what are the disadvantages? Firstly, hard money lenders will typically protect themselves with what we call a low loan to value ratio. So, if you want to use hard money as an effective strategy for coming up with cash, you need to come to the table with a discounted property. The second disadvantage is that hard money lenders typically want double digit returns. So, the interest rates that they will charge will be higher than a bank. And they can start anywhere from 8% and can go as high as 24%. So, if you are going to use hard money as a way to get your start in real estate, you need to be thinking about your strategy. Think whether you are going to buy and sell the property or are going to buy and brave finance.

What about the most important advantages? You can get a hard money loan fairly quickly. A great hard money lender can get you your cash in under a week. The second advantage as already has been mentioned above is that hard money lenders are not focused on you, but the property. Property is the hard asset, which is where the name comes from. So if you are the one thinking to yourself that you can’t get a bank loan as you you don’t have a job, how are you going to get a start? Then hard money loans is one of the most effective sources that you can use to get your start because they are not focused on you. You just need to have the ambition to go out and find a great deal.

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