Credit and borrowing are interesting concepts to know a fair deal about. The fact of the matter is that most of us will have to do a great deal of borrowing in our lives. Some of us may be on the other side of that transaction as the lender. Either way, understanding how different loan products work can help a person make health financial choices that pay off for them in the long run. Today, we will take a look at what are known as hard money loans and try to determine both the positives and negatives of borrowing one.
What Is A San Bernardino hard money Loan?
It is a funny sounding name to call it a hard money loan. The term has nothing to do with the difficulty of obtaining or understanding the loan. Rather, it has everything to do with the collateral that a person puts up to obtain the loan.
To get this kind of loan an individual most have a physical piece of property that they can put up as collateral to get it. This means that one needs to have a house or piece of land that has significant value to it.
The lender wants something that they can fairly easily put up for sale if you default on your loan. They want to recoup their funds no matter what the situation is. This is why the lender will usually only lend out money that is roughly double the value of the property at most. They are not looking to take a chance.
When To Consider A San Bernardino hard money Loan
It is a fact that hard money loans carry higher interest rates than do traditional property loans. It does not mathematical sense to borrow a hard money loan when a traditional one is on the table. Given that, why would anyone ever borrow a hard money loan? Well, there are a few reasons.
Speed Of Service- No one likes waiting around for service. They will have to though if they go through the traditional borrowing process. There is a lot of paperwork involved with that route. The lender will want to check every aspect of your credit worthiness that they can get their hands on. You can expect to wait a good amount of time to hear if you are even approved.
Cannot Get Approved Elsewhere- A lot of people do turn to the hard money lenders when they are unable to get approval elsewhere. They do not have the option available through a traditional lender, so they go with a hard money lender. The other lenders might find them to not be credit worthy enough, or they might not like the collateral they are attempting to put up. Hard money lenders are a lot less picky with who they decide to lend to.
Better Customer Service- Hard money lenders frequently do have better customer service than do traditional lenders. They are happy to help their people because they know that the traditional lending industry leaves so many of them out in the rain so to speak. Some people value this so highly that they would rather do business with the hard money lender than anyone else.
Disadvantages Of A San Bernardino Hard Money Loan
We have to explain the other side of the coin when it comes to hard money loans if we are going to be honest with ourselves. There are some disadvantages to this type of borrowing of course.
Higher Rate Of Interest- As already mentioned, the interest rates on this type of loan are higher than what one would find with a traditional loan. We have already talked about some of the counterbalances to that but it is important to note once again. A person who borrows a hard money loan can expect to be tied in to their loan for longer than a traditional loan.
Collateral Is At Risk- There is significant collateral at risk with a hard money loan. It is necessary to provide significant backing up of the money that you are borrowing with this type of loan. The lender is not going to take your credit history as much into consideration.
There are always different factors to play against one another. This is not a comprehensive list by any means. It is simply a way to take a look at some of the broad issues that come up with hard money lending on a regular basis. Think about this and the other factors that might impact your personal financial situation. Put all of those factors together to best understand if hard money loans are right for your personal situation. It all depends on where you are in life.