If you’re planning on closing a property deal, whether you’re buying a house to flip, or a property to rent out, or something similar, one thing is for sure. You’ll have to secure the necessary financing. And, traditional banks may not be willing to provide you with what you need, either because you have a poor credit score or for any other reason whatsoever, or their process of approval may simply not be fast enough for you.
Is there, however, a different solution? Something quicker, something easier, and something that will guarantee you’ll close that deal before someone else snatches it up? Well, there appears to be. In short, what you can do is use a hard money loan option to your advantage, and thus get the funds you need to get that property you are after. This is an option that is rather popular among investors.
Maybe you have heard of it already. But, you may still not be sure what it exactly entails, or whether you should get it. And then, even if and when you decide that you want to get it, you may not know how to do it right. Quite some important questions, aren’t those? Well, we are now going to answer them for you below.
What Is a Hard Money Loan?
Let us begin with the very basics here. Because, you can’t really decide whether you want to use this option, and you don’t want to talk about how to use it right, if you don’t even know what the option entails in the first place. So, let us cover the basics, and then proceed to the next questions that may shed more light on the benefits of this solution, as well as on the process of using it to your advantage.
Basically, a hard money loan is one that is asset-based, and the repayment period of which is shorter than with the traditional option. What does it mean that this loan is asset-based? In short, it means that it is backed by the property you are buying, and that, therefore, the approval depends on the value of that property, and not on your specific credit score.
Understand the concept even better: https://www.business.com/articles/hard-money-loans-private-lenders/
What you should know next is that these are usually issued by private investors and companies. So, they are the go-to option when banks fail you, or when you simply aren’t happy with the terms proposed by the traditional banks, or with the timeline necessary for completing the entire process, as you may be in a hurry to secure your deal. This, combined with the fact that these are short term, meaning you’ll get out of debt soon, is why hard money loans are so popular among real estate investors.
Should You Get It?
Now, when trying to decide whether you want to get this loan or not, you should definitely take some time to think. In the end, this is a question that only you can answer yourself, because it depends on your personal preferences, your finances, as well as the deal you’re trying to close. But, there are a few things to keep in mind when trying to make this particular decision.
To put it differently, this option definitely comes with some benefits. Speed is, without a doubt, one of those, since you get to complete the whole process in a matter of days, while it would take weeks or months with traditional banks. This puts you at an advantage on the highly competitive real estate market. Read more on hard money loans in general.
Apart from speed, there is the advantage of flexible qualification requirements. In short, your credit score and your income don’t really matter. What matters is the value of the property you want to buy. Once again, this makes things much easier than with traditional banks, and it really goes in your favor, especially if you still haven’t built a good credit score.
In addition to that, the short duration of the loan also matches investors’ needs. And, on top of it all, these private lenders have more freedom to customize the terms to fit your specific needs and requirements. Meaning you can negotiate to get exactly what you want and to get the terms that fit your specific projects, as well as your unique circumstances.
How to Get the Right One for You?
If you’ve finally decided to apply for a hard money loan, you’ll just need to know how to do it right. And, well, the most important thing to do here is, of course, find the right lender that will provide you with good interest rates, and good overall borrowing terms. So, take your time to research different ones, and choose wisely. Once you make the choice, the actual application process will be quite simple from there, and you will be approved pretty quickly, which allows you to close that important deal.
