There are a number of times when you require extra money for a number of purposes such as education for children, medical bills, home or car repair and so many other things. In such cases you need to take loans. There are different kinds of loans available and one of them is hard money loans. Some of the best loans online are hard money loans. There is a common belief that hard money loans are from doubtful sources and they generally rip you off financially. However, this is not true. There are some hard money loans that charge you exorbitantly however there are some private money lenders which gives you loans that are not from the traditional financial institutes. In fact hard money loans aren’t much different from loans from a mortgage broker. When you are taking loan from a mortgage broker you are borrowing from a private investment fund while in hard money loans you deal on a one-to-one basis with a portfolio manager.
The good thing about hard money loans is that they are custom made according to your particular needs and comes in an assortment of conditions. They allow you to make real estate purchases. Such flexibility is hard to get with traditional mortgage funding. One of the major reasons people opt for hard loans is because despite any previous financial drawback such as foreclosure, short sale or if had gone bankrupt, hard money loans still allow you to purchase a home. Hard money loans are thus private loans in which you get an access to a pool of money which is a group contribution of a number of investors.
What you need to keep in mind is that hard money loans have a higher interest rate, similar to those of credit cards ranging from 6% to 12% as these are private financing. The high interest offsets the risks associated with the loans. These loans are thus used mostly as short term financing, sort of like an provisional loan before you get a long term financing. Generally people take a hard money loan when the future benefits according to his investment plan outweighs the current high cost of interest. Such private money loans are always taken for a shorter term ranging from a minimum 6 months to a maximum of 5 years.
Some things you need to keep in mind about hard money loans are:
- These are costlier than other kinds of financing because of the high interest rate.
- You have to make some amount of down payment as hard money lenders generally don’t fund more than 90% of the loan to value amount.
- Since the interest rates are higher, the conditions for qualifying are quite minimal. You don’t have to go through the regular verification of income, check on credit and social security and so on.
- The processing of these loans are fast, generally just a few days, mainly because there is not much documents or background checking.
- These are extremely flexible loans and the lender can tailor make them as per your convenience to the end.
Having said all the above, the basic difference that you should remember between a hard money loan and a traditional loan is that a hard money loan is given based on your assets and not you as a borrower.