Hard money lenders do get a higher interest rate but the risk they take usually overshadows that. Meaning the high interest rate is worth what you are getting. And most people are fully aware of the licensed money lender interest rates, and still do turn to this option. In most cases it is their only option. The higher interest rates are given as security though, as those in need of these loans can have potentially bad credit or none at all. Which is a big risk for the company. In the brighter picture it has been proven that hard money lending can save a clients property or be the difference between losing or creating jobs on a site being developed.
Yanni Raz is a hard money lenders and trust deed investments specialist as well as a blogger and contributor. The goal is to educate other real estate investors before they are getting into bad real estate deals.
When turning to outside finance supporting options you can generally turn to hard money lenders or banks. Both methods of financing projects are commonly used but procedures run a little differently which could affect the outcome of your project! Time is money on a construction site so the quicker you get your money the better the outcome could be.
Identify and approach your situation.
It is important to identify the situation you are in to be able to choose the best option for your needs. For example, if you are an investor planning on remodeling a owner occupied property then your best option is to not use hard money loans because it will be difficult to find someone to work with you. This is because lenders usually prefer short-term lending where they can close a deal within six months or less.
It is common for hard money lenders not having access to as many people as a bank would. Therefore there are less people to process paperwork and do so much. There is a lot of speculation done on the hard moneylenders side and a big risk is taken as it usually means the bank declined their request as their first option.
There is less paper work needed when turning to hard money loans because the only information generally needed is property value and the investors information. Another reason people turn to hard money lending is because they have poor credit or no credit at all.