Monday, April 24, 2017
5 Things You Did Not Know About Hard Money Loans
Here is a list of some of the important things about hard money loans in Houston Texas or anywhere in the united states which most of the people are unaware of:
Hard Money Is a Legitimate Business
Hard money lenders are business people who lend money to other people for their own business purposes. This means that they are no different than a bank because, in essence, they actually do what the banks do, they lend money. It is a mere misconception that these people are involved in some sort of illegal activities and are not reliable whereas, in reality, they are only running a business.
Hard Money Means The Loan Is Backed By a Hard Asset
The word hard only implies to an asset and nothing else. When you borrow money from a hard money lender, he secures his investment by asking for a collateral which is actually a hard asset. Most of the time, this hard asset is real estate. When you actually think about it, the banks also lend money in a similar way and the difference between the two lies in their policies.
There Is a Reason Why the Interest Rates Are High
Many people complain about the high rates of these loans but they have a strong reason for it. The people coming to them won’t get a loan from the bank because of not being able to provide a source of income to them or not having a great credit history. Such individuals then resort to the hard money lenders and if these lenders are putting their trust in them, they definitely need something in return.
Real Businesses Function Through These Loans
There are many reasons people do not go for banks and it is not necessary that their credit history is bad because they have been up to something fishy. Certain people are reluctant to tie themselves to the strict policies of the bank and need flexible working conditions. Thus, they resort to hard money loans. Additionally, the time period for these loans is also limited giving another reason to the borrowers to choose these loans over the bank loans.
Hard Money Lenders Won’t Do 100% Financing
Most hard money lenders would want an assurance that you have the skills and expertise to carry out the business you are starting. This is the reason that they might not give you all the money required but if they can see that you have skin in the game, they might consider financing your business entirely.
Many people only have negative perceptions about hard money loans but they are a convenient option for a lot of investors.