Top 5 Benefits of Hard Money Loans

Hard money loans refer to financing provided by non-institutional lenders. There are many hard money lenders that offer fast financing at attractive interest rates.

As a borrower, you’ll need to do a thorough check on the lender’s reputation and business, but as you do your research, you’ll find that hard money lenders can provide a huge advantage in your quest to finance your real estate investment project.

Benefits of hard money loans

  • Faster Approvals – Without a doubt, one of the main benefits of a hard money loan is the fact that investors can get pre-approved within a day or two, given that they have submitted the number of documents the lender requested. Hard money lenders focus primarily on whether the asset itself has a good market value and whether the borrower’s equity is at least 20%. Funding can take less than a week, compared to normal loans that can take a month or even longer. When asking about hard money lenders, a key question to ask is how quickly they can finance.
  • Flexible payments – With a private lender, you’ll have more freedom to create a personalized payment plan. With a large financial institution, you will not have this freedom. Instead, you must accept the payment terms established by the bank. However, with a private lender, you can discuss and come to a mutually agreeable payment plan that you feel is right for you.
  • Fewer requirements: When applying for a loan from a normal financial institution, you are expected to meet many strict requirements, such as income history, experience, etc. It’s no secret that bank approvals can be a cumbersome process. A hard money lender probably won’t burden you with as many requirements. As long as you have a high-value asset with at least a 20% equity stake, there’s a good chance you’ll qualify for the loan.
  • Zero Prepayment Penalties: If you take out a loan from an established bank, you may be subject to prepayment penalties if you pay off the loan before the due date. Most fix and flip lenders don’t charge prepayment penalties, so if you find extra money and decide to pay off your loan before it’s due, you can do so with confidence without worrying about being penalized for it.
  • Credit History Isn’t a Big Deal: For large lending institutions, your credit history can have a big impact on whether or not you’ll get a loan. With private lenders, less emphasis is placed on a poor credit history. This is because a private lender bases loan approval on the value of the property, the borrower’s equity, etc. As long as you meet these criteria, you have a good chance of getting funds.

An added advantage of getting a loan from a hard money lender is that as more properties in the community are renovated, property values ​​are expected to increase and the quality of the neighborhood improves.

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