Private lending is powered by collateral of equivalent value. It is a viable option for fix and flip investors,rapidly gaining popularity as a funding avenue for the corporate sector too. In 2019, a survey revealed that only 15% respondents turned to state-run lenders. This number is a noticeable dip from the 20% in 2016.
Traditional banks impose complicated conditions on all types of loans. In fact, their turnover time can be as long as 72 hours, while many applications are rejected due to the applicant’s poor credit score. Hard money lenders,however, are willing to work with the individual, regardless of their credit history,to provide support needed to ensure that the project for which they seek money is completed successfully, according to an article on First Funding Loans. This means lower risk for the lender, while it translates to quicker loan processing for the borrower.
However, so many benefits later, there are still quite a few misconceptions doing the rounds regarding hard money loans. Here’s a look at a few common myths and why you should not fall for them.
Hard Money Lenders are Sharks
Between 2015 and 2018, banks saw an increase in fraud, including identity thefts, cyberattacks and account takeovers. Globally, banks are witnessing scam trends, where customers are being manipulated by fraudsters into making payments. Over 60% respondents experienced an increase in fraud volume, while 50% experienced an increase in fraud value, according to the Global Banking Fraud Survey by KPMG International.
However, if you work with a reputed and trusted hard money lender, rest assured your funds are secure. Money lending is safe, regulated and operated by professional lenders. Traditional banks have been seen crippling the financial life of borrowers, in case they failed to repay loans. But if you are unable to repay the hard money loan, the lenders are willing to extend the tenure.
Loan Disbursal from Lenders is Difficult
The lenders require you to simply fill a standard application form. In fact, you can get a conditional loan approval within minutes, unlike banks that might take up to 30 to 45 days to process the application, according to an article on Landlordology.
Hard money lenders also offer interest rates as low as 6% to 12%, making the process all the moreconvenient. The experience further becomes unmatched since the property inspection is fulfilled within 24 hours, followed by loan sanction. Hard money lenders offer flexible repayment schedules, making the process worry-free for borrowers.
Additionally, they are not interested in your credit history, annual income or bank statements, but only consider the collateral and offer funds based on the value of the property, according to an article on The Balance.The best lenders also offer in-house real estate professionals to make sure your investment is absolutely viable.
Hard Money Lenders Charge High Interest Rates
One of the prominent factors to check before applying for a loan is the interest rate. For this kind of asset-based loans, the interest rates are usually affordable,ranging from 6% to 12%. In fact, if you put down some money beforehand, the risk for the lender is lowered. This can further translate into low interest rates and a flexible term. Even if the interest rates are high, hard money lenders are still a superior option to traditional banks. You get the loans sanctioned quickly, while the lender offers you support with your fix and flip venture. Borrowers also tend to save quite a bit in the long run, since one can tweak the payment structure.
In all, a reliable hard money lender will review the application thoroughly and offer honest solutions as well. If you are confident about repayment, get in touch with a reliable private lender today.