Hard money loans can get cash in your hand quickly and are generally used for short-term investments like house flipping. These loans have a much shorter repayment schedule than traditional loans, and often don’t have the same requirements. Is a hard money loan the right option for you? Here’s who can benefit the most from hard money loans.
Who benefits the most?
Typically, those who can benefit the most from hard money loans are investors looking for:
Quick Approval Process
If you need a speedy approval process, you will benefit from a hard money loan. Investors who need urgent funding find it more convenient to use hard money because approval can take as little as a day with investors receiving their cash in 10-14 days. Traditional loans do not offer a quick approval process, as these loans can take up to 30 days to get approved.
If you are looking for a loan but want to avoid the thorough regulations of a traditional loan, then you will benefit from using a hard money loan. Hard money lenders are not required to use the same underwriting process of traditional loans, giving you more flexibility when acquiring a loan. Hard money lenders do not have to pay as much attention to a borrower’s credit score and debt-to-income ratio as traditional lenders. They will be more interested in the value of the property, and whether it makes a good investment.
Fund Multiple Projects at Once
Hard money loans allow you to leverage other people’s money, making it easier to allocate capital for multiple projects at once. Funding multiple projects at once with traditional loans is much harder to pull off due to processing times and strict loan requirements. Hard money loans give investors the benefit of taking on multiple projects at once by leveraging other people’s cash.
Flexible Term Structure
Looking at hard money loans, you have increased flexibility in your term structure since you are working with a private organization or lender as opposed to a large financial institution. There are still guidelines that all money lenders must follow, but hard money lenders generally offer more flexibility when you want to negotiate a better term. Traditional lenders do not offer the same flexibility when negotiating loans.
Better Approval Amount
Unlike traditional loans who only look at the standing value, hard money lenders will look at the future value of your property when determining the loan you will be approved for. When using a hard money lender, you do not need to pre-qualify for a certain loan amount and then search for properties based on the pre-approval. Hard money lenders will lend up to how much your property is worth.
No Prepayment Penalties
Hard money lenders will often give you the benefit of not having to pay pre-payment penalties if you decide to pay your loan back ahead of schedule. Traditional loans will hit you with pre-payment penalties, but most hard money loans will have a specific date on which their pre-payment penalties end. Hard money loans do not penalize you for wanting to pay off your loan early.
How to Qualify:
Want to qualify for a hard money loan? It’s not hard! Hard money lenders will look at a few things before deciding if you qualify. Your lender will want to see that you are able to repay the loan back and if you are financially healthy enough to acquire a hard money loan. As long as you can prove that you can pay your loan back, it is fairly easy to get approved. Prepare a repayment strategy if you do not have enough upfront capital. Hard money lenders will look for proof of income to make sure you are able to make the monthly payments on your loan.
RCN Capital offers short-term and long-term financing options for real estate investors. Whether you are looking to fix & flip properties or hold properties for rental income, RCN has flexible options that are suited to your needs. Connect with us today to discuss your next real estate investment.