Investing in real estate can be an excellent way to generate wealth and increase your income sources. However, investing in real estate is often a risky venture, and it requires substantial financial muscle. As a result, many traditional banks are hesitant to lend money to real estate investors because of the potentially high risks.
If you’re unable to get a loan from a traditional bank to fund your real estate project, a hard money loan can come in handy. Unlike traditional bank loans, hard money loans aren’t issued depending on the borrower’s creditworthiness. Instead, hard money lenders or private lenders issue real estate loans based on the value of a property.
Do You Need Hard Money?
While hard money is an excellent way to get funding, you may particularly want a hard money loan for the following reasons:
You Have a Bad Credit Score
If you have a poor credit score, traditional banks are less likely to offer you loans. However, hard money lenders are more likely to offer you hard money loans (also known as bad credit loans) even if you have a bad credit score but substantial equity in the property you own.
You’re Into Real Estate
Real estate is typically a risky venture. Because of its volatility, banks are usually reluctant to offer loans to real estate investors. If you’re a real estate investor, a hard money loan may be your best opportunity to secure funding. Hard money loans are particularly ideal for property flippers because they have shorter terms and can provide the capital needed to purchase and renovate a property.
Advantages of Hard Money Loans
That said, here are some pros of getting a hard money loan:
Applying for traditional bank loans can be tedious. What’s more, lenders may take weeks to months to scrutinize your application to assess your creditworthiness. If you’re a real estate investor, this puts you at risk of losing out on a property.
With a hard money loan, you can get funding in no time. Unlike many traditional lenders, hard money lenders won’t take ages scrutinizing your application. Instead, hard money lenders focus on the value of the property against the loan amount solicited.
Traditional lenders such as banks tend to have stringent rules. Hard money lenders, on the other hand, provide more leeway. For instance, depending on your circumstances, you may be able to negotiate for a longer repayment period or a fee waiver.
Good for Starters
If you’re new to real estate and you aren’t ready to part with a large sum of money upfront, a hard money loan can enable you to purchase a property quickly.
Less Emphasis on Credit
Traditional lenders such as banks place a lot of weight on creditworthiness before issuing loans. Hard money lenders, on the other hand, focus more on the value of the property. Thus, even if you have a poor credit score, you may still qualify for bad credit loans.
Bad Credit Loans in Atlanta, GA
Overall, hard money loans are ideal for real estate investors looking to get funding fast and avoid the bureaucracy associated with banks. Bad credit loans are also ideal for individuals with poor credit scores but significant equity in their property. If any of those two individuals sound like you, get in touch with us today to learn more about hard money loans.