How to Get a Hard Money Loan?
Hard money loans are an excellent choice for individuals/businesses with a low credit score. They are quick to get, easy to repay, come with minimal paperwork, and are often the first choice for real estate ventures and bridge loans. If you are looking to get a hard money loan, there are a few things that you must know because a bad deal with a predatory lender may turn out to be pretty expensive for your business. Let’s start by understanding what a hard money loan is, then we will get to how you can apply for one.
Hard Money Loan – What is it?
A hard money loan is money you borrow from a private lender or an individual in exchange for a property as collateral. It is an excellent option for borrowers with a low credit score or high-risk borrowers who may not get a bank loan. Itis a short-term loan and is not given by traditional lending institutions.
Hard money lenders do not worry about the credit score because they take property as collateral and can sell it to recoup their money. This type of Loan also comes with an exorbitant interest rate for security.
Some hard money lenders require a down payment to ensure a smooth transaction. In most cases, house flippers and real estate investors ask for a 20-30 percent down payment.
According to experts, the lenders who do not ask for a down payment are mostly predatory lenders who would eventually ask for excessive fees, balloon payment terms, or there may be unrealistic payment schedules.
For a hard money loans Los Angeles, you can turn to Lantzman Lending. It is a trusted, reputable lending firm that has been in the lending industry for more than 30 years now. Lantzman Lending offers you custom created loan programs for real estate investors, and their loan rates start from just 8%.
How to Get a Hard Money Loan for your Business?
Arrange/Save the Down Payment
Most lenders ask for a down payment of 20-30% of the loan amount. You will have to arrange the money before you can apply for the Loan. Without a down payment, you may have to pay a high-interest rate.
Find a Reputable Lender
A hard money loan is a risky business. This Loan is given according to the value of the property you offer as collateral and high-interest rates. If you fail to pay the loan amount at the end of the loan tenure, the lender becomes your property owner and can sell it to get back the loan amount. Furthermore, some shady lenders in the market offer risky loan contracts that may result in heavy losses and even collateral property loss. It is crucial to find a reputable lender for a successful transaction.
Show Investment Potential
A hard money loan is an investment for the lender. You need to showcase the investment potential of your project to draw in the lender. If the lender feels like you won’t achieve your intended goals with the real estate project in the discussion, he may refuse to lend the money. It helps to show that you have experience in real estate through technicalities such as construction budgets, architectural plans, and contractor bid sheets. You can also share essential data such as potential growth of the neighborhood and past and current selling prices of the nearby properties.
Apply for the Loan
Once you are ready with the down payment and the data, it’s time to apply for the Loan. Hard loan money is usually approved quickly and is given for a short term, like a few months or a year. You will have to present essential documents such as the deed for the property in the discussion, your identity proofs, a loan form (if any), and other documents asked by the lender, such as bank documents, tax information, etc.
A hard money loan is a useful but tricky loan that can go smoothly if you do not have a good plan. Before you apply for this type of Loan, create an immediate repayment plan so that all the work is completed on time to repay the loan amount. And always go for a reputed lender only.
