5 Top Benefits of Using Hard Money Lenders

Perspective borrowers with unconventional credit histories often struggle to qualify for loans through traditional lending institutions. Aside from their inflexibility, many conventional lenders are unforgiving regarding checkered credit histories. If these circumstances apply to you, consider borrowing through Hard Money Lenders. Flexible lenders such as these allow you to pursue a wide variety of investment options such as investment properties, fix and flip properties, or other properties essential to your economic well being.

Why Would You Need Hard Money Lenders?

Hard Money Lenders are most convenient for those with unconventional incomes and those with problematic credit history. When you work as a freelancer or a contractor, your income is difficult to document in a manner palatable to traditional lending institutions. Therefore, you are more likely to secure funding for your loans if you work with a lender that recognizes a more flexible range of documentation than just W-2s or 1099s. Many self-employed people are unable to provide succinct documentation of this variety; therefore, they’re excellent candidates for a loan through a hard money lender.

1. Speed

If you apply for a loan, especially a mortgage, you will have to furnish an undo amount of documentation. It takes a surprising amount of time to gather the documentation you need to successfully apply for a mortgage or a substantial loan through a major bank in the United States. These delays aside, most major national banks will take at least a month and up to four months to process your application. This means you could end up waiting months to hear that your application was rejected and that you needed to start again from square one.

One of the biggest advantages of working with a hard money lender is that you can reasonably expect your loan to be approved and funded in one to two business weeks. For many small business owners and contractors, timing is critical in making essential purchases, many of which are enabled by expedient loans such as those offered through lenders with more flexible terms than traditional financial institutions. When you need to pounce on a fragile opportunity, you need a lender willing to assess your finances from multiple vantage points.

2. Flexibility

Many borrowers who end up using Hard Money Loans are people who failed to qualify for loans through major American banks based on their credit histories or their income. Expeditious property owners and savvy homeowners can capitalize on Hard Money Loans in a way that facilitates long term financial success, even when credit and income appear to be an obstacle.

Investors who are adept at renovating defunct properties are uniquely qualified to capitalize on the benefits of a loan that requires no documentation. Investors who need capital fast to purchase a home from which they can create a profit almost immediately need access to a form of funding that suits their flexible lifestyle. If either and or both of these circumstances apply to you, a hard money loan may dislodge the most cumbersome fiscal obstacle in your life.

Another common motivation for seeking a hard money lender is the desire to fund an investment property. This is often an effective tactic as investment property owners can pay off debt quickly based on their rental income. For this reason, many property owners find Hard Money Loans to be an effective tactic in enhancing the value of their rentals.

3. Likelihood of Approval

When you apply for a loan through a major bank in your area, you must conform to the preferences of that firm’s algorithm in order to qualify for funding. This process excludes numerous solvent aspirational borrowers with disposable income to purchase a substantial property. If you find yourself on the outside looking in based on your unconventional income, you may find Hard Money Lenders a helpful building block on the road to your financial security. Hard Money Lenders are often willing to assess alternative documentation, such as bank statements, to account for income earned outside the purview of the most simplified tax return.

If your credit score is below 600 or so, you may struggle to qualify for loans through the largest banks in your community. You’ll likely have more success pursuing funding options that are dependent on the capital that you generate on a day-to-day basis. These same lenders are willing to ignore red flags such as bankruptcy or defaults on other loans. It’s the most reasonable way someone with no credit history or poor credit history can secure funding even if it isn’t on the most advantageous of terms.

4. Down Payment

Frankly, the last two items on our list are often cited as downsides to a hard money loan; however, we find that view overly simplistic. Even the most flexible lenders are reticent to fund a hard money loan without collateral that is worth substantially more than the loan. Because of this, down payments on Hard Money Loans are often around 30% of the value of the property or item you would like to purchase. This means you have to come up with a large sum before you qualify for a loan.

Obviously, it is a hassle to get a huge down payment together and lay all that money on the table at once, but it is efficient, in the long-term, to put as much down as you can. If you do, you will actually end up paying less in interest because of the lower principle on the loan.

5. Term of Loan

The term of Hard Money Loans tends to be much shorter than those of mortgages or auto loans through big banks. This often means the monthly payments are higher than they would be with other loans; however, a shorter-term loan requires you to pay more in principle every month, which can actually decrease the amount you end up paying in interest.

For instance, imagine the amount of interest you would pay on a 30-year mortgage if you paid a bit in interest every month for three decades. Compare that to steeper interest rates on loans—you need to pay back in three to five years. It may hurt in the immediate-term, but it facilitates some substantial financial gain in the end.

Fidelity Funding Helps You With Hard Money Loans

Fidelity Funding in Los Angeles and Glendale Ca specializes in providing Hard Money Loans in addition to trust deeds and home equity lines of credit. Loans can be provided to almost every type of property. Contact Fidelity Funding today.