More and more investors in the real estate market are becoming discouraged by the elevated interest rates that are being set by many hard moneylenders recently. In fact, many investors are quite put off by the lack of information that is available to them.
In comparison to traditional loans, moneylenders often double the interest rates that are imposed on hard money loans. This is not what investors in need of financial backing for their real estate endeavors want to hear. However, some who continue to use hard money lending to finance their investments in the real estate market would not agree.
What Is The Difference?
Contrary to what some may believe lenders do not impose such high interest rates in order to make borrowing more difficult for those who wish to invest in the real estate market. In order to comprehend fully why lenders do what they do, it is critical that you understand the risk that they take when funding rehabilitated or other types of property.
Banks and other various lenders assess carefully the potential borrower’s ability to pay the money back when he or she applies for a loan. The lenders check credit scores and ask the borrower to provide a number of different documents as well as proof of income. The process is a tedious one, not to mention incredibly time-consuming. The borrower is forced to wait around for nearly a month before he or she is able to find out if the application for the loan has been approved or denied. All of this is done to ensure that if the lender approves the loan, the money will be paid back according to the agreement.
Hard moneylenders are at a greater risk for loss. They lend money to individuals who may not have the best credit score. These lenders look at what the potential borrower is presenting in their application for the loan, rather than if he or she will be able to repay the loan on time. For example, if you are looking for a loan to purchase a property to flip, the lender will look at the property and determine if it will be in their best interest to give you the money that you need.
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Tags: Hard moneylenders, investors, Real Estate, real estate market
{ 2 comments… read them below or add one }
Hi Sean,
Thanks for sharing the perspective of the hard moneylenders. I like that they evaluate the merits of the property and if they think it’s viable; you get the money. It’s a completely different approach to the banks.
So, for investors who use hard moneylenders, you really need to have done your research.
I can see the merit of using hard moneylenders in flipping properties as long as exit fees were extremely low otherwise it would make the margins a lot tighter. Great article.