Borrowing money is a common aspect of being an adult, and most adults take out such loans such as college tuition loans, auto loans, mortgages, and credit card loans. Many such loans are issues from banks and are needed to finance large purchases, but this is not the only type of loan that a modern American or Canadian adult might get. In some cases, a property owner may look to hard money lenders for private loans. These hard money lenders tend to be small and private, and these private money lenders are often an attractive option for property owners who need a fast loan despite high interest rates on those loans. This is not an advisable route for first-time property owners to take, but someone who is experienced with property ownership and who needs fast money may turn to hard money lenders in their area, and they may appreciate how fast and convenient it is to get loans from hard money lenders. When dealing with hard money lenders, what might be expected to happen?
Taking Out a Hard Money Loan
This is a related field to car title loans; that is, the borrower will offer their property as security for a loan based on that item’s value. A car title borrower will visit a car title loan site with that car and its title, while someone looking for a hard money loan will turn to hard money lenders in their area and make an offer. Someone interested in this may look up “hard money lenders in my area” and use their ZIP code or the name of their city or town to find something fairly local. It may also be noted that most people who need a loan are urged to use more conventional routes for borrowing money instead, since hard money lenders may be tricky for novices and the loan may turn out to be more trouble than it’s worth. Only if someone truly needs a fast loan, and they know how to deal with hard money lenders, should they look to get a hard money loan.
Who is looking to get a hard money loan? Most often, these borrowers are those who are facing an immediate financial problem, such as problems with the equity on their house, massive debt, or similar issues. What is more, such borrowers are typically pressed for time, and they can’t afford to take the time needed to secure a loan from a bank or a credit card company. What is more, these lenders might have no or poor credit, and this makes them unlikely to get approved for a loan from those other, mainstream money-lending services. If these conditions are applicable, the homeowner or other property owner may look to hard money lenders for a solution.
To get such a loan, the borrower will approach the company and show the deed to their property and its current value (which may be evaluated by a third party). These hard money lenders are popular because they don’t require a lot of paperwork or time to work with, and a loan may be approved even if the borrower has poor or no credit. This tight time frame and easy approval make hard money lenders popular. What happens next? Assuming that the loan was approved, the lender may expect a loan to value ratio, or an LTV ratio, of 60-80% or so. What does that mean? The borrower will not get 100% of their property’s value for the loan, but rather, a smaller percentage that may be 60-80% or so. What is more, these loans tend to be paid back on a short time frame, and they may be 24 months long or as aggressively short as just six months. These loans are interest-only in nature, and they only can be taken out for properties that are not currently occupied by the owner. These loans also tend to have high interest rates, typically 7.7% or higher, often as high as 10% or more. Such interest rates would be shocking for a loan from a bank, but someone who urgently needs money right away may accept those terms when they deal with hard money lenders.