Top Myths and Misconceptions About Hard Money Loans
By G. David Lapin On June 23 2023
Using hard money loans to leverage your next real estate project
Hard money loans are only for desperate borrowers: This is a common misconception about hard money loans. While it's true that hard money loans are often used by borrowers who may not qualify for traditional bank loans, they are not exclusively for desperate individuals. Hard money loans can be a viable financing option for real estate investors, entrepreneurs, and even individuals with strong credit profiles who need quick access to capital.
Hard money loans have exorbitant interest rates: While it's true that hard money loans typically have higher interest rates compared to traditional bank loans, the perception that they always have exorbitant rates is a myth. Interest rates on hard money loans can vary depending on factors such as the borrower's creditworthiness, the loan-to-value ratio, and the specific terms of the loan. While they are generally higher than traditional loans, they reflect the increased risk undertaken by the lender.
Hard money financing is for desperate situtions : Hard money is often portrayed negatively, but labeling them as loan sharks is an unfair generalization. Hard money specialsist's can and do provide an alternative source of funds for creative mortgage loans needs. They operate within legal frameworks and their goal is to make a profit by providing short-term financing solutions.
Hard money loans are only for real estate investments: While hard money loans are commonly associated with real estate investments, they can be used for various purposes. Real estate investments, fix-and-flip projects, and property renovations are popular uses for hard money loans. However, they can also be utilized for business purposes, such as funding small businesses, startups, or even bridging the gap between traditional loan approvals. Hard money financing often consider the value of the collateral rather than focusing solely on the borrower's credit history.
Hard money loans are a last resort: While hard money loans are often used when traditional financing options are unavailable, they are not necessarily a last resort. Many borrowers choose hard money loans because of their speed and flexibility. Traditional loans can involve lengthy approval processes and stringent criteria, whereas hard money loans can provide quick access to funds, making them attractive in time-sensitive situations. Additionally, hard money loans can be used strategically by borrowers who have the means to repay the loan quickly or who need short-term financing for specific projects.
For more information on our Hard Money Loans or Trust Deed Investments, call our office at 714.838.1474 ext. 102 or visit our:www.hanovermc.com