Hard Money Lenders
If you are interested in flipping houses, you might have heard of terms like hard money lenders or hard money financing. Hard money lending tends to be a real estate transaction whereby an individual puts up a home as collateral for a short-term loan.
Such a borrower might plan to use the loan to renovate that property and make enough money to both repay the loan and turn a profit. And, due to the relatively high-interest rates associated with hard money financing, such loans are lucrative for alternative lending programs/lenders as well. Let's dive in and discuss how hard money loans work.
Hard Money Financing: The Reality & The Risk
Hard money loans, however, have both their pros and cons. Thus, a realistic assessment requires taking all such factors into account.
Pros & Cons
While it is great to get a rapid loan and do so regardless of credit history, carefully consider the cons as well. The cons include higher interest rates and the risks associated with hard money loans. For instance, if you miss loan payments, you risk losing the properties and your progress.
- Rapid Loan Acquisition
- Credit History Irrelevant
- Negotiable Terms
- High-Interest Rates
The obvious risk for the lender though is that you might not repay the loan. However, if you can not repay the loan, the lender might assume possession of your property.
What Are Hard Money Lenders?
Whether companies or individuals, hard money lenders distribute loans based primarily on your collateral, not your credit history, as a bank would with a traditional loan. Obviously, from the perspective of both the hard money lenders and the borrowers, such loans could be viewed as risky. However, they could also be considered lucrative investments for both parties.
Learn More About Loans
Learn more and get a quote from one of our experienced experts at i Fund Cities. Find out if their alternative lending program is a suitable option for you. Regardless, we hope you found our article interesting and informative, and best of luck in all of your real estate ventures.