What Is a Hard Money Loan and When Is It a Smart Choice for You?

Hard money loans are very popular in the house flipping world. They work well for many, but they’re always the right fit for every flipper. You should always do a little research to figure out if this type of loan is right for you.

A Loan from a Hard Money Lender

A hard money loan is a special kind of loan that you get from a private lender called a hard money lender. These lenders specialized in large, short-term loans that are usually secured by the collateral of the home being purchased. Almost always used in the home renovation and sale industry, these loans are incredibly popular among those who need a significant amount of cash quickly and who might not qualify for other types of loans.

When You Need Money Fast

Getting a traditional renovation loan can take much longer than many think, so they just don’t fit the needs of most who are looking to get a quick flip done. The most common reason to get a hard money loan is that you’re looking for a large amount of money and you simply don’t have time for the usual underwriting process to go through. If you know you need to move on a project quickly, this might be the right kind of loan for you.

When You Flip Frequently

This is also a good type of loan for those who are frequent house flippers. Once you get a few successful flips under your belt, you’ll find that getting this type of loan is easier than getting virtually anything else. The secret here is that private lenders are almost always happy to lend money to those who they know will make a good return on their initial investment.

When Your Credit Isn’t Perfect

Finally, you might find this loan to be a smart choice if your credit is holding you back from getting another type of loan. Hard money loans have their own criteria, and many of these lenders are happy to work with those that major banks turn away. Though you might have to fulfil other criteria to prove that you are trustworthy, this is a great loan for those with the ability to pay but don’t have a good credit history.

Hard money loans cost more and have to be paid back quickly, but they can be great for flipping. Do some research to figure out what kinds of loans you are qualified for and what kind of impact they’ll have on your business. Once you run the numbers, you’ll be able to tell if one of these loans is the right fit for you.

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