Understanding Hard Money Lenders

Hard money lenders have always existed in our society, but these alternative loans have seen an influx of business recently. The spike in these alternative loans can best be attributed to the economic crisis of 2009. Traditional avenues like banks became keenly aware of the amount of risk they were taking after the economic collapse. This made it harder for people with poor or no credit to obtain money from these traditional sources. Let’s go over everything that the consumer needs to know about these alternative sources of credit.

Shorter Period, Higher Interest Rates, and Fast Cash

These deals are fabulous as short-term options. If you need cash and you need it now, this is your best option. A banking institution will not be able to provide you with the financing quickly. They will take their time and review your credit history and perhaps your background. However, interest rates on cash from a bank are a lot lower, and the terms of the deal are generally set for a longer period of time. If you are looking for a long-term situation, you probably do not want to choose a hard money lender. The terms of the deal will include high interest rates, so over a longer period of time, they are not worth it.

Little to No Credit is OK

You can secure one of these deals without very much or any credit at all. Hard money lenders will use your assets and properties as collateral for your debt, so credit history means little to them. This business practice puts a large amount of risk on their shoulders, and this is why the interest rates on these deals are so high. If you’ve got solid assets to back yourself with and you know your financial needs are only temporary, these are great loans to get.

More Business-Oriented Than Banking Institutions

With hard money lenders, you may find yourself getting better terms or more money based on what purposes you have in mind for the cash. These private lenders are not bound by the same stringent rules as bankers. If you have a good idea or solid investment plans for the loan you are receiving, you may find yourself getting more cash than you can back with assets. Small business owners may find that it is easier to get off the ground with these business-minded people rather than with traditional bank loans. The important thing to remember is that there are a lot of opportunities out there, and it would be wise to completely weigh all of your options before you lock yourself into a loan agreement of any kind.

There is more inherent risk involved with hard money lenders, but they provide many more chances for opportunity as well. Taking the safest route isn’t always the right way to go about things. This country was founded by people who took chances. The key is to ensure that you are making educated decisions about how much risk you take on.