By Adam Robert
Individual loans are a well known entity. Whether you need them for a car, a home, or a small loan to pay off debts and consolidate multiple payments into one monthly payment. So what is a hard money loan? Traditional hard money loans are typically secured by real property and are considered a last ditch effort by companies or individuals. Hard money loans are not used by banks as these loans are mostly used in real estate related transactions. These loans function differently than traditional loans. They act as a bridge of cash flow for the individual or company that is in need with the assumption once the loan is paid back the property will be returned.
Instead of the loan being based on the individual or company’s credit score the loan value is determined by the actual value of the property being used as the bridge. These loans are not typically long term loans and are primarily used to make money quickly. Property flippers often use hard money loans with the intent to pay off the loan quickly and pocket the additional money from selling the property at a higher price. Carolina hard money can answer more questions about their hard money loans available.
Another benefit to hard money loans is that they are not as in-depth as a traditional loan. The process goes much quicker giving the approved individual or company access to the money much earlier than a traditional loan would. Lenders of hard money loans do not risk that much unlike traditional loans because if the loan is defaulted then the lender takes the property and sells it to make back the loss. The lack of risk makes these loans easier to get as long as the individual or company has property equal to the value of what loan they’re seeking.
Negotiations of these loans vary and can be completed in a few days. These loans can be approved for several months or several years depending on the specific needs. The lender will set up monthly payments. This will include any fees and negotiated extra costs. However, in the case of a property flipping the company or individual borrower can ask for reimbursement for any maintenance or rehabilitation from the lender itself. This will only happen if it was in the initial agreement.
Some hard money loans will require a down payment. Not all lenders do but some will ask for a percentage of the loan. Carolina hard money lenders have a variety of options with and without down payments. Some individuals and companies with a stellar credit score can finance their entire loan rather than putting down twenty to thirty percent of the loan beforehand. Down payments can sometimes lower the interest rate of the loan but it is important to check before assuming.
Interest rates will vary depending on the amount of loan, the lender themselves, and the individual or company’s track record if loans have been taken out before. The general rates of interest vary between eight and fifteen percent. In most cases interest is calculated by the length of the loan and this includes any renovations done to the property. Administrative costs are a normal part of hard money loans and are generally one to ten percent of the loan.
Banks do not deal in hard money loans. Individuals and investors are who give out hard money loans as they can profit from successful loans. Research before choosing a lender. Compare loan tactics and interest rates before signing anything.
