Greatest Reasons Behind The Popularity Of Hard Money Loan

Anyone who’s had to borrow a loan from a bank will tell you how cumbersome it is to get approvals. The review process is very strict and takes forever to be complete. Banks have rigid terms and conditions that are difficult to navigate. This is especially detrimental in the real estate market where dealers have to make an investment as soon as possible. So, real estate dealers have been turning away from conventional loan to hard money loan in Denver. Whether it’s to acquire new property or flip and sell the existing one, hard money loan has many applications in the real estate industry. Here’s why it is preferred by borrowers and lenders alike:

High Return On Investment

This point will talk about the reason why many lenders are willing to loan hard cash despite the risks involved. Lender’s get a high return on investment when the borrower pays the debt. This is thanks to the high interest rate paid. In case the loan isn’t paid, the lender can liquify the collateral and equity. And because this loan is a short term loan, they do not have to wait long for the repayment.

Unaffected By Credit Scores & Revenue History

Banks use your credit score and income history as the main criteria when deciding if they should lend you the principal amount. If you fall short in these criteria, the bank will not lend the money. Hard loan lenders don’t use these criteria when deciding whether they should lend the amount or not. Their sole concern is the borrower’s guarantee and equity.

Swift Approval

On average, the paperwork involved in conventional loans can take forty five to ninety days before banks approve your loan. You can’t wait that long if you have to start your real estate project within a few weeks. The closing process for hard money loan in Denveris very short. The paperwork involved is minimal and limited to the borrower’s relevant financial details. At times, your loan can be approved the same day your apply for it and your cash will be ready in a week.

Flexibility In Lending

Banks have rigid terms and conditions that will invalidate a loan even before it is applied for. Banks don’t finance many real estate projects like fix and flip even if your credit score are top notch. The same problem occurs if your property is under mortgage or has some problems. Hard loan dealers are ready to overlook these problems in favor of your property’s market value. They may even lend you multiple loans if you can provide collateral for each. Banks usually limit the amount of loans they give a person at a time.

Reliable Business Partner

Despite the collateral guaranteed, it is in the lender’s interest that your real estate venture is successful so that they don’t suffer any losses. So they will analyze your business plan, point out the flaws and suggest appropriate solutions. Very often, the lender is an expert in the real estate business and understands the workings of the market. So by borrowing hard money, you get a reliable business partner whose interests are aligned with yours.

Cheaper Than Equity Source

Despite the high interest rate, borrowing hard money might actually be cheaper than borrowing from an equity source like a joint venture in the long run. After all, the loan period is shorter. Moreover, the equity lender might ask for shares in the real estate project which would affect how much returns you make on the investment.

Reliable Loan

How many times have you heard about banks pulling out of loans during an escrow? If your answer is often, that’s another reason to turn to a hard money lender. Most hard money lenders are known for sticking until the end of the deal to ensure that nothing jeopardizes it. After all, your success is in their interest as well.

These are some reasons that hard money loan is popular among both lenders and borrowers. If you are willing to risk the high interest rate and short time period, it might turn out to be a good investment.

About This Author

Brittany Wolfe https://www.reddashmedia.us/ Hi, I am Brittany. I am a writer, illustrator Joined: October 21st, 2019