hard money

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A hard money loan is a private lending alternative to obtaining traditional loans in Atlanta, GA. These loans are usually for those seeking funding in the real estate business. Hard money loans were started in the late 1950s when the credit industry was in a state of significant change. These loans are typically short term, ranging from two to five years and are secured on a basis of collateral. Typically, the collateral is the property the borrower is seeking the loan for.

What are the benefits of a hard money loan?

There are two key benefits to choosing a hard money loan over a traditional bank loan: Collateral and Speed.

  1. Collateral: A hard money loan is based on the agreement of collateral. The lender is interested in the value of the real estate or property the borrower is looking to fund. They are not as concerned about past history or credit scores like a traditional bank loan. The average American has about $38,000 worth of debt, but a hard money loan gives borrowers a second chance to obtain loans. They also allow those who may have a compromised credit score to obtain loans. Lenders gauge their willingness to take risks based on what they think the property is worth and what kind of property types they specialize in.
  2. Speed: Quick approvals are associated with obtaining a hard money loan. This is possible because the company providing the loan is private and not under a bank’s strict guidelines. They don’t have to run background checks or credit scores because the agreement is negotiated on collateral and the borrower’s current financial ability. Many loans can be approved within a week, which is ideal for real estate projects that attract a high number of bidders.

What do you need for private lending in Atlanta?

Even though hard money loans are easier and quicker to obtain than bank loans, there are three requirements hard money Atlanta lenders will expect from borrowers.

  1. Down Payment: Lenders want to see the borrower have a large down payment on the property. This shows commitment of the borrower to the property and it poses them as a lesser risk to the lender. Many lenders require a down payment anywhere from 25% to 40% of the property upfront, depending on the property type.
  2. Cash Reserves: Cash reserves basically mean the borrower needs to show they are capable of making the monthly loan payments along with any other fees that might be attached to the property. Because hard money loans are not based on credit score, interest rates are usually higher than bank loans. The average interest rate in the Atlanta area is 13.3%, but this varies by lender.
  3. Experience: As with anything, having experience is always beneficial for the borrower. A borrower with more experience and a history of selling properties and paying off loans will be looked on more favorably. This is not to say a first-time borrower will be denied, but a first-timer needs to have a solidly outlined plan. This shows the lender that the borrower has put time and thought into how they are planning to succeed in their real estate endeavor.

Now that you have this information on hand, you’re ready to obtain a hard money loan. Contact Hard Money Georgia, an experienced hard money Atlanta lender, for details on how to finance your next project!