A hard money loan is a great way to get money for things like real estate investments. If you don’t have a lot of savings and you are not willing to tie up all of your liquid money, you can use a hard money loan to fund your project. According to Hard Money Advisor, Atlanta, GA, alone has 50 hard money loan providers offering loans within the city. Before you take out a hard money loan, one of the things you need to look into is the interest rate. Let’s look at how interest rates are calculated for hard money loans.
Credit Score
One of the factors that affect the interest of your hard money loan is your credit score. Although the property you are planning to acquire plays a huge role in determining your interest rate, the lender will also look at your credit history. A low credit score means that lending money to you is a high-risk transaction. As such, individuals with a low credit score may face higher interest rates. Hard money lenders are known to give money to individuals with credit scores as low as 600.
The Loan Amount
Another factor that affects your interest rate is the amount you are taking. If you are planning to borrow more than $500,000, you are likely to get a higher interest rate than someone who is planning to get a loan of $100,000. This also boils down to risk. When a lender is giving your a loan of $500,000, they stand to lose more if you fail to make your repayment than when they give out $100,000.
Term Length
How long will it take to pay back the full loan amount? The length of time it takes to pay back your lender also affects the interest rate. In most instances, a shorter-term length usually has higher interest rates. On the other hand, a longer term usually comes with more flexible payments and better interest rates.
These are some of the factors that affect the interest rates you get on hard money loans. All these factors are taken into consideration when calculating your hard money loan interest. Another factor that might determine the percentage interest you get is the type of property you are acquiring. Lenders usually prioritize investment properties over other factors. If you are investing in a low-risk property, like a house, as opposed to something like a farm, you may get lower interest rates. Contact us today for more information.