Money lending is a critical issue that most people generally avoid. Why? Well, loan-taking is a burden to us. The more you take loans, the more you pay the interest amounts. Apart from that, the more repayment tenure is, the more interest amount will grow. People generally go for loans when they need money to take big steps. For instance, home loans, car loans, and education loans are popular worldwide. Apart from that, hard money loans are also getting the attention of best real estate agents. Notably, the real estate world is the most happening industry on our planet, and it has no fall. With time, the industry will only grow; thus, there is no looking back for this industry. However, when it comes to real estate deals, those are mostly exciting and quick. So, people dealing with the real estate world are more accurate in their deals and want loans immediately. HouseMax hard money loans are perfect for them as their disbursed time is low. On the other hand, traditional loans come with lower interest rates and more repayment tenure options. So, it might seem an alluring option for you to go. However, real estate agents love to go for hard money loans. Why?
Well, they prefer deals with hard money loan lenders. Want to know more? Keep reading to understand the pros and cons of considering hard money loan lenders and traditional banks.
Who Is A Hard Money Loan Lender
A hard money loan lender is a private or individual lender who provides loans based on the value of a property rather than the borrower’s credit score or financial history. So, you will get a proper benefit here if you need quick money on a loan.
These lenders do not care about your credit history, but they only consider your collateral. In this way, they will get assurance of your old property so that if you do not pay them on time, they will take over the property as a backup.
Generally, hard money loans are short-term loans that are used by real estate investors or property developers. It helps them finance their new properties and projects quickly.
Unlike traditional banks, hard money loan lenders have a more flexible underwriting process and can fund loans quickly. They do not focus on the paperwork much, and thus, it makes it difficult to process the loan.
Difference Between Hard Money Lenders and Traditional Banks
When it comes to borrowing money, there are two main options: hard money lenders and traditional banks.
Hard money lenders are private or individual lenders who provide loans based on the value of a property, while traditional banks typically require a good credit score and financial history.
One of the main differences between these two is the underwriting process. Hard money lenders have a more flexible process and can fund loans quickly. On the other hand, traditional banks have stricter requirements and take longer to process loan applications.
Moreover, the interest rates and repayment terms of hard money loans are different from traditional loans.
When it comes to hard money loans, you will need to pay as the interest rate is high. But they will only ensure shooter repayment days, for instance, 1 to 5 years.
In contrast, traditional bank loans offer lower interest rates and longer repayment terms.
Overall, hard money loans are better suited for people who need quick financing for their projects. On the contrary, traditional bank loans are ideal for those with good credit who need long-term financing for personal use.
Advantages and Disadvantages
One of the prominent advantages of a hard money loan is that you will get money instantly. If everything goes fine, your hard money loan will be approved between 24 hours and seven days. On the other hand, traditional banks come with prolonged approval tenure, which is unsure as well.
Hard money loans do not proceed with too much paperwork. So it will not take much time to approve your loan. However, the biggest disadvantage is that hard money loans come with higher interest rates than traditional banks.
Apart from that, if you need longer repayment dates, the hard money loan lenders might not provide you. So, try to understand your niche and then proceed with the particular type of loan you need with all the details shared here.