How to Get Hard Money Loans (Fast!)
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Originally Posted On: https://fupping.com/marcus/2020/03/23/how-to-get-hard-money-loans-fast/
Want to learn how to get hard money loans fast? You’ve come to the right place. Click here to learn more about it today!
Believe it or not, more than 68 million people have low or bad credit scores. This makes it hard to qualify for traditional bank-issued loans, especially if you’re looking to renovate or fix and flip a property.
Hard money loans give borrowers with bad credit the opportunity to finance those projects. However, finding loans quickly can be tough.
Here’s how to get hard money loans quickly so you can start working on your project as soon as possible.
Make Sure It’s the Right Choice for Your Needs
Hard money loans are loans issued by a business or individual lender rather than ones issued by your local bank. That means the company issuing you the loan is able to give you money as soon as they approve your application. However, it comes at a cost.
In most instances, their interest rates will be significantly higher than the ones you’d qualify for with a traditional loan. The repayment terms will also be much shorter. Instead of having several years to repay your loan, you’ll typically have just one year.
If you’re just looking for money to help you finance the purchase of a car or to help you get through a tight financial spot, a traditional bank loan will be a better choice. However, if you’re looking to fix and flip a property or need a large amount of money to finance a real estate transaction, hard money loans are a great choice.
Put Together a Detailed Plan for Your Project
If a hard money loan is the type of financing you need, you’ll need to put together a detailed plan that shows the lender how you’ll be able to repay the loan within the allotted time.
This means outlining the steps you’ll take to complete your project and the estimated return on your investment, and the total cost of the project. They’ll also ask for documents showing the value of your property as-is.
Keep in mind that hard money lenders won’t offer a loan to cover the full cost of your project. In most cases, they cover about 70 percent and it’s up to you to fund the remaining amount.
Include information on how you’ll fund the remaining portion of the project, whether it’s with cash or another loan. This will help them better understand your situation so they can render a decision quickly.
Remember to have enough cash on hand to cover the closing costs on the loan. The amount of those closing costs will vary from lender to lender, but you’ll have to pay them before the lender will issue the loan.
Accept That You’ll Post Collateral
Lenders expect you to post collateral when you accept a hard money loan. In most cases, the collateral is the property you’re working on.
If you default on the loan, the lenders can take possession of the property, giving them access to everything you’ve done to date. Once they take possession, they can sell the property or continue the renovations as they see fit.
If you’re not comfortable using the property you’re renovating as collateral, you may be better off looking for a different loan.
Shop Around for Lenders
If you’ve decided that a hard money loan is the best way to finance a project, you’ll need to find a reputable lender.
Start looking for hard money lenders in your area and get quotes from each one you’re interested in. Compare the interest rates, the amount of money they’re willing to extend, and the repayment terms.
Ask each lender about their preferred communication methods and how often you’ll be able to follow up with them. The more you can stay in touch with each lender, the faster you’ll be able to get your money.
Research Each Lender in Detail
Once you’ve got a few lenders in mind, take the time to research their reputations in detail. Look for lenders that have financed similar projects in the past and check their reputation with the Better Business Bureau to make sure there aren’t any outstanding complaints or issues.
If a lender doesn’t have a good reputation, keep looking. The last thing you want to do is find yourself caught up in a scam or end up losing your investment because you chose the wrong company.
Talk to Your Lawyer Before Accepting the Loan
Think of a hard money loan as an investment in your business. If it’s a good deal, it can help you improve your business and increase your potential earnings. If it’s a bad deal, you could end up losing thousands of dollars.
Once you have the loan agreement in-hand, speak with your lawyer immediately. Get them to go over the terms and make sure the agreement protects your interests, too.
If they find anything wrong with the agreement, discuss your concerns with the lender. Some lenders will adjust their agreements to better suit your needs, but if they won’t, you’ll want to find someone else to work with.
Create a Payment Plan Immediately
As soon as you sign the paperwork, start creating a repayment plan. Check the repayment requirements in the loan agreement. Most hard money loans expect you to repay the loan in a single lumpsum payment.
You can always start setting money aside throughout your project to help guarantee that you’ll have enough cash to pay off the loan.
Remember, defaulting on the loan means you’ll forfeit your right to the collateral.
Now You Know How to Get Hard Money Loans
If you’ve been wondering how to get hard money loans to finance an upcoming project, this guide should help you get the best deal possible. Just remember to do your research and only work with lenders with established reputations.
Once you find a good lender and present your plan, you should be able to get the money you need in just a few weeks. That means you’ll be able to start working on your project quickly so you can make a profit and repay the loan as fast as possible.
For more helpful tips to streamline your renovations or construction project, check out our latest posts.