Hard Money Loans—What They Are And Where to Use Them

 

Are you a real estate investor looking to book properties but are struggling with cash on hand? Or perhaps you need a short-term loan for another purpose, such as furniture for home, a small project, etc.

In this case, hard money loans can come in handy. In this article, we’ll discuss what they are and where they can be used.

What Are Hard Money Loans?

Hard money loans are short-term financing that a borrower can get against a collateral, such as real estate. The loan is given by individuals or private investors that expect to get the principal amount and interest within one to five years.

Because these are short-term loans and have greater risk associated with them, the interest rates are higher on these than other loans.

How Does The Lender Calculate The Loan Amount?

The lender will determine the loan amount with a calculation known as the loan to value (LTV) ratio. This is done by dividing the loan amount by the value of the property used as the collateral.

The LTV ratio lets lenders find out the strength of the loan. A hard money lender will typically offer loan amounts that are 65-75% of the collateral’s value.

Where To Use The Loan

Hard money loans are usually used for properties and real estate. Mostly these loans utilize some kind of property as collateral. However, some hard money loans may be given against other hard assets. A borrower may turn towards hard money loans when other means of traditional financing are not available.

Hard money loans are usually used for:

·         If the borrower has a bad credit score they can utilize hard money loans because hard money lenders do not consider the borrower’s credit score but the value of the collateral.

·         When you need quick financing, you may turn towards hard money loans because they are approved very quickly.

·         When you’re fixing and flipping properties, you only need financing for a short period of time and can use hard money loans.

Wrapping Up

Hard money loans are short-term financing means that are best for real estate investors. In this article, we discussed what hard money loans are and where they can be used.

In case you’re looking for hard money loans Dallas, we highly recommend Getting in touch with Investor Lending.