When you are planning on getting a loan, it’s best to know your options. Speaking of options, you might have come across hard money loan. It’s not exactly the best type of loan to use for starting your business or to purchase CFD stocks, but it’s still worth it. It comes from individuals who lend money by taking your property as collateral.
Mostly, when you are applying for a loan, lenders require proof that you will repay it. For that, they check your income and credit score. Your loan only gets approved if you have a history of repaying your loans responsibility.
The problem is, getting your loan application approved from a traditional lender is slow and painful. It’s frustrating even if you have a great credit score and a steady stream of income. In case you have a negative item on your report or an income that is a little difficult to verify, the process of approval may take longer than usual. Chances are your application isn’t approved in the first place. This is where hard money loans come to play. However, these loans are ideal for real estate investors who flip homes.
How much money will the lender lend you depends on the worth of the property in question. It can be the property you already own or you are acquiring. The lenders care about the value of the property instead of your credit score. If you are a borrower who is having a hard time getting a loan because of a short sale or foreclosure, this loan is for you. If you have enough equity in the property that you are planning to use as collateral, you still qualify for this loan.
Presenting your property as collateral is a bold move but hard money can be your only resort because of the following reasons:
Primarily, the lender is only concerned about the amount of equity a borrower has in the property. Your credit rating does not matter to most of the lenders. Like mentioned earlier, issues such as foreclosure and even short sale are overlooked.
However, the lender certainly considers the plan of the borrower regarding the property. You as a borrower are supposed to give a plan about how you intend to pay off the loan.
Some people think hard money loans are for investors with a bad credit history. That is not always the case. Check out its pros for further clarity:
Depending on your financial need at hand, hard money loans are not a bad choice after all. Since the turnaround is quicker, it’s an attractive option even for a trader online. Before you approach lenders who are willing to offer this type of loan, make sure you do your homework.