A Few Options When It Comes To Choosing From Lenders
Obtaining a loan for just about any reason whatsoever right now is not easy due to how hard the economy has been hit with the recession. However, this really is the time when hard money lenders can really thrive because they are not subject to the exact same lending standards as banks. And there are several great reasons for this upsurge in the availability of hard money lending.
The recession has really put a damper on the amount of traditional lending that is taking place. The market is merely to unstable to permit for banks to take the risk for normal interest rates. The number of sub-prime borrowers in the market for loans make it too risky for most traditional lenders to lend.
If You Have A Bad Credit History
Having a bad credit score history, or not sufficient revenue are a couple of potential reasons for lenders not lending to these borrowers.
But if a would-be borrower has collateral he can offer for a secure loan, hard money lenders may be able to help out. Then if for any reason the payments are not produced on time or at all, the lender will acquire the collateral property and lose no money whilst maybe even making some money.
While this kind of lending may be looked down upon by some people, and especially governments it appears, it’s really a very valuable service to those that know how to use it properly and responsibly.
Some folks that use these lending services are actual estate investors. One of the things that draws these investors to the financing of hard money lenders is the fact that they are able to originate a loan very quickly. In some cases a loan may be granted by a hard money lender in as small as three days.
Real estate investors lots of times have to jump on deals so quick that obtaining a loan in a hurry is really advantageous. Obviously certain actual estate investments may be a bit risky so whatever property is being funded by the loan will probably be used as the collateral to secure the loan.
Choosing Between Two Mortgage Lenders
The elevated risk that borrowers bring to hard money lenders indicates that they charge an rate of interest that could be considered a fair bit higher than normal. But of course a lender who is taking on so much more risk ought to be and economically should be compensated for it by higher interest payments.
But considering that most hard lenders only deal with brief term loans of usually five years or much less, the interest payments may not add up to be all that much in the whole scheme of the investment.
A hard money loan, even having a higher rate of interest than a bank loan, will nonetheless give an investor a wonderful opportunity to make money with property investments. Both the borrower and lender gain from the exchange. As the lender an borrower profit they also will probably be adding value to the community about them also.
In conclusion, hard money lending may be a lifesaver to investors, especially when the economy is not performing nicely and banks are not lending.