Investment Information: Common Hard Money Loan Misconceptions
Despite being popular among investors, there are many hard money loan misconceptions that should be cleared up before you start investing in real estate.
The hard money loan definition is a short-term loan for individuals investing in real estate. These individuals generally flip the properties in order to make a profit. Hard money loans are also available for land purchases. Because the hard money loan process is significantly shorter than that of a traditional loan, investors use hard money to acquire investment properties quickly. Here are some common hard money loan misconceptions:
Hard money loans are a last resort.
There are many borrowers who prefer to borrow from alternative lenders instead of traditional lenders. Hard money lenders are more flexible, efficient, and lenient. Hard money lenders can fund a loan in a matter of days which is incredibly beneficial to savvy real estate investors who want to make a short-term investment. It’s definitely not a last resort.
Alternative lending is unregulated.
Hard money lenders may not have the same capital requirements as traditional lenders but they still adhere to federal and state lending regulations. Just because hard money lenders make it easier for investors to finance their investments doesn’t mean that they are exempt from contract law.
Alternative loans are for desperate borrowers.
Banks turn down loans for many reasons, not just bad credit. Savvy real estate investors with well-structured and profitable business plans can still leave a bank empty-handed. Alternative lenders have a lot to offer borrowers besides financing, such as communication, integrity, and timeliness. Alternative lenders want their borrowers to succeed in their investments and they will help the borrower find the right loan that works for them.
Alternative lenders are loan sharks.
Alternative investors do not give out loans unless they deem it wise and profitable. Their goal is to make a return, after all. Hard money lenders are specialists who will help the borrower find a loan that works for them. The terms of a hard money loan are not impossible, in fact they are incredibly flexible and the lenders make it easy for the borrower to negotiate.