Understanding Short Term Hard Money Loans
Since you cannot raise a huge amount of money at once to start a project, getting a loan is the only option available. Traditionally, banks have been the lending partner at all times after the applicant meeting some threshold requirements. What happens to those who don’t qualify? The need to help those missing out on bank loans has seen an increase in the number of hard money lenders around us. Though the Short term hard money loans are easier to secure, their terms are more restrictive with specific terms attached to it. It is upon you as a borrower to understand the rules and seek clarifications where in doubt better securing one. Understand the following term of these short term hard money loans before applying for one.
Private money
The money you will be given for your investment purposes by the lenders is largely their personal money. You opt for this; it is going to be a one on one agreement but not with an institution like in the banking scenario. It is the lender now to devise ways that will protect the investment capital being lent to you. That is why you will be given strict terms and guidelines of repaying the same. You could have done the same if you were in the position of the lender hence it is justified to some extent.
The terms vary from lenders around you, and it is at their discretion to determine they are ready to give you basing on the property or deal at hand. Whether the short term hard money loans work for you or not, the lenders position themselves where they stand to win in both situations experienced by the borrower. If the amount is paid in full, they get a profit. In the case of a default on the borrower’s part, they can resale the property and still get profit on the amount they initially lent.
That is why it is important to take time and compare the available hard money lenders around while doing a cost-benefit analysis on your side to ensure you get terms that will fit your budget needs and the repayment schedule. Get the amount figure you want to borrow and compare with the price you will pay after attracting the set interest. The interest varies from 12%- 20% annually and varies depending on your experience with the lender or credit score. Keep in mind that the interest is high and other costs too are imposed on your part like the closing costs.