Three Reasons Why A Hard Money Loan Could Be For You

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How does a hard money loan work

Everyone has a dream in life — whether that means owning a home or opening a small business. Unfortunately, those dreams tend to require a good amount of financial backing. Most of us don’t have the money to lay down immediately. And it goes without saying that buying a home or starting a business requires a good amount of capital. These endeavors usually involve taking out loans. Yet at the same time, many who want to start fresh find themselves rejected by banks. This could be because you’re young and have little credit history. It could be because you don’t have a long history of working a traditional job. Some find themselves with bad credit because they helped a friend out when signing a lease, only to find themselves burned. Others have simply made a mistake or two in the past. You shouldn’t be punished for your entire life for a mistake you made when you were young. But these mistakes can follow you around when you’re seeking a loan. This is why many today are now seeking out hard money lenders. Private hard money lenders could make a major difference in your life. Let’s look into why many people are seeking hard money lenders over traditional lenders, even when they have a choice between the two.

1. Timeliness

When seeking a loan, time is usually of the essence. Some are looking to buy a home; if you drag your feet on that, the house will be snapped up. Others want to go to school, and more still have entrepreneurial ambitions. No matter what you desires, you probably can’t wait a terribly long time for your money. Traditional lenders often take a long amount of time to decide whether or not you’re approved as a borrower. Then there is more time still while you wait to receive your capital. Hard money loans don’t work this way. Hard money lenders are highly prized for their quick turnaround rate. Usually, you can expect a hard money loan to process within seven to 14 days. This gives you much more time to have your money and do with it what you must. People can get active faster, and for young people in particular — just starting out, whether in school or business — this makes a big difference.

2. Opportunity

It seems as if, in this day and age, traditional lenders don’t want to give anyone money. As the need for student loans rises, so too does the amount of debt accrued by young people. If you already have debt, it may be difficult for you to be approved by a bank for more. This makes life very difficult for people, and things like buying a home or starting a business may seem impossible. Typically, a prospective bank borrower looking for a business loan has to have been in business for two years, have at least $250,000 in annual revenue, have good personal and business credit, and be cash flow positive. These standards can be impossible to meet, and the fact is that you shouldn’t have to wait years for a loan. Private hard money lenders are more likely to give potential borrowers a chance for several reasons. These loans are simply more attainable.

3. Attainability For Those With Equity

Some people do get approved for bank loans, but don’t want to deal with paying off those loans for 30 years. The way hard money loans work usually involves collateral. Typically, investors in hard money loans are protected in that the loans are secured by a property with 30 to 50% in equity. For these reasons among others, the duration of the payment period is shorter. While a bank loan may be paid off over the course of 20 years, private loans are granted with a duration of one to five years, usually. If you feel confident in your ability to repay, a hard money loan may be a better option for you.

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