When you need finance immediately but you dont have enough
time to wait to look for the right lender for a conventional
loan then you can go in for hard money loans.
With the hard money loans the lender approves the loan based on the value of the equity in the assets. These loans are given out without spending much time on the verification and assessment and documentation on the borrower as the traditional lenders. The only disadvantage with these loans is that they involve a higher rate of interest than the other loans.
When taking a hard money loan you should know that the lender would not spend much time on verifying your details like the documents, your credit history, the tax payments, source of income etc. In case of hard money loans the lenders would avoid any verifications and would give out the loan solely based on the value of your assets. These loans are provided at the shortest duration of time that is possible. These loans are used to fund immediate needs for which the borrower cannot wait for a long time.
With hard money loans the loans are processed faster ad are independent of your credit history and income. Besides the borrower can also borrow in case he is facing any legal issues. The loan repayment terms are flexible and vary from the repayment period of 6 months to 20 years. You can ideally take a loan amount varying from $50,000 to $1,000,000 but keep in mind that you would have to give a collateral either fixed or liquid maybe any of your real estate.
The Hard Money Loan is offered when the borrower offers the related property as a collateral for the loan. The amount of loan that you can get depends on the quick sale value of the property that is pledged as the collateral. In case you default on these loans then the hard money loan lenders are the first creditors to get the remuneration. The loan amount is decided as the percentage of the quick sale value of the property. This percentage is known as the Loan to Value ratio. The LTV varies between 60-70% of the value of the property.
Let us now have a look at the eligibility criteria for the hard money loans.
The hard money loans are a good option for borrowers who cannot
get loans or are unable to borrow loans from conventional
lenders. Generally legal and operational issues surround people
who take hard money loans. Keep in mind that hard money loan
lenders often solve the problems and get the suitable property
for getting money from traditional lenders. Usually the type
of property that can be given as collateral depends on the lender.
Usually properties like apartments, condominium, mixed use properties,
hotels, office buildings, foreclosure properties, land acquisition,
property under construction etc can be used as collaterals.
The loan size varies from one lender to another. However the range of borrowing with a hard money loan can vary from $500,000 to $75,000,000 based on the type of collateral that is pledged. The repayment duration for these loans can vary from 6 months to 20 years. The interest rates on these loans is based on the amount of loan that you take, the repayment the risk involved in the loan. Taking into consideration these factors the interest rates vary from 10-13% with a 2% fees. There are some lenders that would provide 100% financing but such lenders are very few. For residential loans if the borrower has 15% equity in the property or any liquid asset then the collateral is considered to be enough. But in case of commercial property the lender requires 25% equity in the collateral.
The processing of the hard money loans is very easy and is fast as compared to the processing of the other loans. These loans are also available with online lenders and can be accessed just by filling in the online forms on the web site of the lender. With online hard money loans applying for the loan can be made much easier. The online processing takes a shorter time and the cost involved with the online loans is also low. The borrower just has to fill the application on the web site that would ask for personal and financial details. The next you should request for the quotes from the lender. The quotes that the lenders give are free of cost. Besides with the quotes that you get you can estimate the total cost of the loan. Besides these quotes also help in comparing the loan offers from various lenders.
You can also apply for these loans through the phone. Once you have the phone numbers of various lenders you can call them and get the quotes from them. In such a manner the loan is processed fast and you can get the amount early. The hard money loans are a risk for the borrower so before you take these loans you should analyze your situation carefully whether you would be able to pay back the loan on time. Keep in mind that the interest rates are high and hence the monthly payments for the loan would also be high. If you have enough time to apply for the loan then you should go in for the traditional loan. These loans should be used for the purpose of investment, business, acquisition, refinancing, construction etc.
The hard money loans require a collateral that is decided by the lender and hence you should be careful while taking these loans.
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