Now more than ever, entrepreneurs are ditching big banks and getting hard money loans. These loans come from privately owned entities, making them the ideal funding option. However, not every hard money lender is the same.
Keep reading to learn about the different types of hard money lenders and which choice is best for you!
What Is a Hard Money Lender?
Hard money lending is very different than traditional bank lending. But why?
For starters, hard money loans are private and place an emphasis on real estate development. Where traditional banks hesitate, hard-money lenders will typically take a chance.
However, these hard money lenders also require collateral to ensure their safety. They offer faster loan approvals compared to traditional banks. So if you’re on a tight deadline, a hard-money lender may be right for you.
Referrals and Reviews
When comparing lenders, you want to look for their referrals and reviews. Most reputable lenders will have a portfolio of their past clients. Don’t be afraid to reach out to these clients as they can give you direct feedback on their experience.
If you want to go further, the Better Business Bureau or BBB may give accurate reviews. Not taking these precautionary steps could result in a bad loan offer. Or even worse, cause your investment to suffer.
Comparing Hard Money Lending Rates
Typically, hard money lending rates tend to have higher interest rates. But what is a fair hard money lending rate?
First, these loans have standard monthly interest payments, which allows for a shorter loan term. These rates are usually around 7% to 15% or more. A trustworthy commercial lender will also have transparent terms and conditions with these rates.
So stay away from any lenders that don’t have clear and written terms. These lenders usually don’t follow state credit protection laws.
Commercial vs Personal Hard Money Loans
Finance for real estate can come in many different ways, depending on your goals. Commercial loans are the most popular amongst entrepreneurs.
However, you don’t need to be a big real estate mogul to receive loan approval. So consider the following questions:
- Will my project need significant investment?
- Do I have a limited time frame associated with this project?
- Am I working with other individuals on this project?
- Does this project include an existing business?
If you answered yes to the questions above, chances are you need a commercial loan. Commercial loans are best for big projects such as business renovations and real estate development.
In contrast, personal hard money loans are great for smaller projects. For example, personal renovation and smaller real estate investments.
It’s important to know what kind of loan you’ll need. This way, you don’t get pulled into unknown territory when discussing your funding options. Furthermore, a reliable hard money lender will sit down with you and thoroughly discuss your options.
Ready to Start Your Journey?
A hard money lender is always the best choice when considering commercial loans. And as confusing as all these terms may seem, we hope this article helped ease the process.
So don’t wait any longer and start your application process with us today. If our diverse clientele and years of experience don’t show our commitment to success, then our competitive rates will.
