Hard Money Loan Information: Alternative Lending 101
Alternative Lending 101: Traditional lenders are not ideal if you are an investor looking for flexibility and leniency. If you don’t meet all of the criteria and jump through all their hoops, not only do traditional lenders not want to grant you a loan, they simply can’t due to all of their strict regulations. That is where alternative lenders come in. Because of the strict regulation of traditional lenders, demand for hard money loans is high.
What is alternative lending?
Alternative lending describes the loan options that are available to individuals that do not come from traditional lenders such as banks. These loans are generally used by borrowers who cannot get approved for a traditional bank loan due to their strict regulations when it comes to income and credit scores. Alternative lenders overlook credit and income because they care more about the value of the property. This is because the property serves as collateral. In the event of a default, the lender takes possession of the home. Another reason why investors choose to turn to alternative lending is because they can finance a loan in a matter of days and the loans are typically short-term.
Why are the rates high?
The interest rates for these loans are typically high because they are much easier to obtain, they can be financed quickly, and the borrowers work with lenders who value two-way communication, experience, and professional relationships. These lenders provide loans for savvy real estate investors who, for whatever reason, cannot get a traditional loan. Alternative lenders give these investors the opportunity to get the financing they need for their projects.
Today’s real estate markets of California are growing quickly and hard money loans are frequently used to finance investment property. What you want to look for when choosing a hard money lender is experience, communication, fast processing, adequate capital, and flexibility. When it comes to trust deed investments and hard money loans, the lender will be more involved with your investments than a bank would.