Are you thinking about taking out a hard money loan? Before you do, researching more about getting one might help you decide if it’s for you. Read on to learn what it takes to get a loan from hard money lenders.
Who are Hard Money Lenders
Hard money lenders give out loans to people who need money for a new startup, flipping a property, or are trying to renovate their current home. These hard money loans can be the answer to all your financial struggles if you can’t get a traditional loan from a bank or credit union. However, like all loans, it comes with its own set of rules.
So, you might wonder: how can I find these hard money lenders? Well, it’s a lot easier than you think since they are all over the place. You can easily research some local hard money lenders to see which one is right for you.
Asking Hard Money Lenders for a Loan
After you find a few that look reputable and legitimate, put together a professional proposal that will have them saying yes. It’s easier to get a loan through this lender, but they will more than likely approve your loan when you present them with a laid-out plan. This plan should portray how you will repay the loan you owe them within the time they give you, which is likely 3 to 5 years.
Like most lenders, they will each have their interest rates and other particular rules for each borrower. You should go to more than one lender to see where you can get the best deal.
Asking Others for a Loan
Are you okay with asking family for money? It can be awkward, but you can borrow the funds from family, friends, or acquaintances for financial help. Even though family and friends aren’t hard money lenders, they are still another option for getting a fast and private loan.
Your family or friends trust you so that you will get a loan from them faster than other lenders. You can also figure out the loan requirements, such as how long before you need to repay them.
This option might sound great, but it can become a little messier if you drag out repaying them. It could affect your relationship if you don’t pay them back on time, so try to stay on track.
What It Takes to Get Approval
Most people know that it’s hard and takes a long time to get a traditional loan approved by a bank or other lender. However, it’s faster and easier to get approval by a hard money lender. If you are tight on time and need financial help with a project right away, this might be your answer. As reported by Harvard.edu, a traditional loan can take up to 30 to 45 days, while a hard money loan can take a few weeks. Therefore, a hard money loan can get your project going more quickly than a traditional loan can.
Traditional lenders often deny those who have a low credit score. However, that’s not the case with hard money lenders and their stipulations for approval. According to Harvard.edu, “An individual with bad credit can find a hard money loan in the event the job indicates a probable gain.” So, your credit score not matter to them as it does to other lenders since you have to pay them back sooner. This also means you are left with high-interest rates and points could be added to your total amount owed to them.
However, you need some collateral, such as your house or another property for them to approve your loan. They need that collateral in case you aren’t able to pay them back within the time frame you agreed on. Therefore, this is another reason your proposal needs to be perfect. Knowing how you will repay them will be crucial to keeping your collateral in your hands. Otherwise, you might lose it if you don’t commit to your business or remodeling plan.
Is a hard money loan for you? You should research and go over all your options before you settle on this loan. It might seem like your only solution, but going over all the pros and cons of seeking hard money lenders is essential. You could risk losing your collateral and owing them much more than you originally planned. Getting further into debt won’t solve anything, so make sure your proposal is perfect enough. Stay committed and focused on your business goals so you can repay them on time. You can do this if you put the effort and work into it!