This loan is a type of lending that is offered by non-institutional lenders. Note that there are many lenders who are ready to lend out fast funding at the best interest rates. For this reason, you must conduct an extensive research on the lender’s reputation, but as you are conducting your research, you will realize that hard money lenders can offer great benefits in you strive to finance your real estate project.
In most cases, applying for hard money lending takes 24 hours and might even be approved the same day. The simplicity and openness of this type of lending have made it the most preferred alternative for many business people, mostly in the real estate and house flipping markets.
Unlike other types of loans that are based on your credit score, a hard money loan is based on the value of your real estate investment project. While all loans are somehow based on your credit score, it will be easier to get any amount based on the equity of your investment plans.
Because hard money lenders tend to depend on the competition in the area, most lenders are forced to lower their interest to fit their local markets. On the other hand, the traditional loans lenders will not look at the local competition. This makes the lenders offer their loans at high-interest rates, making it unfavorable for many investors.
With a hard money lender, you have a chance and freedom to make your customized repayment plan. Note that with other types of lenders such as conventional banks, you will never get this freedom and you will be forced to accept the repayment plans scheduled by the bank. Nevertheless, with a hard money lender, you have an opportunity to talk and arrive at mutually agreeable repaying terms that will suit your requirements.
When it comes to getting a loan from a traditional bank, you will be required to meet hundreds of hard-set requirements such as the history of your income and experience. Additionally, bank approvals tend to be a cumbrous process. When it comes to hard money lending, you will not be stressed with many requirements.
Whenever you get a loan from a leading bank, you will be subjected to prepayment penalties once you fail to repay your loan as per the agreement. The majority of fix and flip lenders will not charge prepayment penalties, so if in case you realize you have excess cash and decide to pay off the loan before the due date, you can assuredly do that without worrying about getting penalized for that.
One of the significant advantages of this type of lending is the fact that business people can get a pre-approval in one or two days, once they have presented the handful of paperwork required by the lender. Hard money lenders will concentrate on whether the asset has a high market value and that the equity of the borrower is at least 20%. Therefore, funding will take place less than seven days, making it the best choice for many investors.