Debunking Hard Money Loan Myths

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Are you having a hard time financing your project? Do you wish to explore the option of hard money loans? If so, the chances are that you have come across quite a lot of information.

It is easy to take everything you hear about loans at face value. It is equally easy to get mislead because of them.

Here are some of the most common myths surrounding hard money loans. If you aren’t opting for this solution because of them, know that hard money loans are a viable option!

1. Hard Money Loans are mostly scams

A lot of people don’t opt for Hard Money Loans, Houston, and other places have to offer because they think that such loans are usually a scam.
Well, let’s say that any loan can be a scam if you trust the wrong lender. Be it a traditional bank or a hard money loan lender; there is always a risk attached to being scammed by a dishonest lender.

A lot of people think that since hard money loans require up to 50 percent equity in the property, there has to be something fishy in its mechanics. But, this equity requirement isn’t due to any scam. Instead, it is a safety tool for lenders who wish to save themselves from loss in case the client defaults.

2. Hard money loans always have strict rules

Hard money loans are called “hard money” because they are hard to get. But, this doesn’t necessarily mean that the rules and requirements will always be strict. There are no generalized rules when it comes to hard money loans.

Just like all other loans, different private hard money lenders tend to apply different rules on their borrowers. For instance, some might charge a higher interest rate while others might ask for various collaterals for the safety of the investment. It all depends on the lender, not the nature of the loan.

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3. Hard money loans are expensive

Yes, hard money loans charge a higher interest rate than conventional loans. There are more closing costs associated with it, as well. But, for a loan to be truly expensive, there are various other factors you must look at.

One of the most significant factor to look at is time. In the world of business, time is money. And hard money loans are easier to get than conventional loans. Since they get approved much more quickly and have shorter terms, in the long-run, hard money loans are much more cost-effective than other options.

Additionally, while traditional loans tend to finance at most 50 percent of the total cost, hard money lenders are much more giving. They can offer you up to 90 percent financing. In terms of operations and time value of money, hard money loans might end up feeling more economical than they are!

4. Hard money lenders don’t care about borrowers’ exit strategy

A few lenders among the hard money lender circle have created a bad name for the entire group. There are some lenders out there that lend money to people for the sole pretext of owning the business. These lenders want your investment to fail so that they can take your property from you below par value.

We cannot contend that such lenders don’t exist. However, not all hard money lenders are like this. In fact, to say that hard money lenders are always sharks would be to make a generalized and sweeping statement. And this is something one should always avoid in the world of finance.

If you seek help from a reputable hard money lender, you will observe that they will always ask for your exit strategy. Why? Because they would rather avoid the foreclosure process that follows after owning a property.

Professional hard money lenders avoid investing in those borrowers that fail to provide a solid exit strategy in case of a mishap. This is because this strategy is directly seen as an assessment of the reliability of the lender.

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5. Hard money loans are only for desperate borrowers

It is often believed that only desperate borrowers who don’t qualify for any other type of loan will apply for hard money loans. This is not the case. Some borrowers tend to choose hard money loans over conventional loans.

Why?

This is because of the flexibility and closing speed of the loan. Since conventional loans take a longer time to process as well as to get approved, people prefer paying the extra interest in the flexibility offered by hard money loans.

The truth is out: Use hard money loans!

Now that hard money loans have become mainstream make sure that you don’t let such myths stop you from exploring this option. Use hard money loans to finance your project if you think this is your best bet. Whatever you do, make sure you make an informed decision.

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