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5 Common Misconceptions About Hard Money Lending

When most people think about borrowing money, the first thing that comes to mind is a traditional bank. However, there are other options available, including hard money lending. Although this type of loan has gotten a bad reputation in the past, it can be a great option for some borrowers. Here are five common misconceptions about hard money lending:

5 Common Misconceptions About Hard Money Lending

Hard Money Lenders Only Provide Loans To Businesses

One common misconception about hard money lenders is that they only provide loans to businesses. This is not the case! Hard money lenders actually offer a wide variety of loan products, including residential loans. In fact, many hard money lenders specialize in residential lending.


Another common misconception about hard money lenders is that they are only interested in lending to people with perfect credit. Again, this is not the case! Hard money lenders understand that life happens and sometimes people have financial setbacks. As long as the borrower has the ability to repay the loan, most hard money lenders will be happy to approve the loan.


Hard Money Lenders Charge Very High-interest Rates

One common misconception about hard money lending is that these lenders charge sky-high interest rates to their borrowers. In reality, hard money lenders typically charge higher interest rates than traditional lenders, but not always exorbitant rates. The reason for this is that hard money loans are considered to be higher risk than traditional loans, so the lender needs to offset that risk with a higher interest rate. 


However, the interest rate you'll be charged as a borrower will depend on a number of factors, including your creditworthiness, the amount you're borrowing, and the length of your loan term.


Hard money loans are typically short-term loans, which means the lender needs to be able to sell the property quickly if the borrower defaults. While interest rates may be higher than those charged by banks, they are still lower than those charged by some alternative lenders. Hard money lenders only lend to people with bad credit ratings.


Hard Money Lenders Only Lend To People With Bad Credit Ratings

This is one of the most common misconceptions about hard money lenders. The truth is that hard money lenders will lend to anyone with a property that they deem to have value. Whether you have good credit or bad credit, if you have equity in a property, a hard money lender will likely be willing to work with you.


Some people also believe that they only lend to people who cannot get traditional financing. This is not true. Hard money lenders are more interested in the value of the property than they are in the borrower’s credit history. So, even if you could get traditional financing, you might still opt for a hard money loan instead.


Actually, many hard money lenders will lend to people who have good credit ratings – as long as they can demonstrate that they have a strong business plan and/or collateral.


Hard Money Loans Are Only For Investment Properties

An investment property is a real estate property that has been purchased with the intention of generating income or capital appreciation. An investor will usually make repairs and/or improvements to an investment property in order to increase its value before selling it or renting it out.


Another common misconception about hard money loans is that they can only be used for investment properties. While it's true that many hard money lenders do focus on investment properties, there are also those who will lend to owner-occupants. So, if you're looking to purchase a property to live in, don't rule out the possibility of getting a hard money loan.


Hard Money Lending Is A Lot Riskier Than Traditional Lending

There are a lot of people out there who believe that hard money lending is a lot riskier than traditional lending. The reason why they believe this is that they don't really understand how hard money lending works. Hard money lending is actually quite simple and it's not nearly as risky as people make it out to be. In fact, hard money lending can be a great way to get the money you need for your business without having to go through a bank or another financial institution.


The reason why hard money lending is so popular is that it allows you to get the funding you need without having to go through a long application process. With traditional lending, you would have to fill out an extensive application and then wait weeks or even months to hear back from the lender. With hard money lending, you can usually get the money you need within a few days. This is because hard money lenders are more interested in the value of the property you're using as collateral than your credit score.


Another reason why hard money lending is so popular is that it's a great way to get around strict borrowing requirements. With traditional lending, you would have to meet a number of different requirements in order to qualify for a loan. With hard money lending, however, there are usually no such requirements. This means that you can get the money you need even if you don't have perfect credit or a lot of equity in your home.


Are you interested in learning more about hard money lending? If so, be sure to call us today. Our team of experts would be happy to answer any questions you have and help you get started with the process.

Do You Need a Hard Money Lender You Can Trust?

Persevere Lending (PL) is a California Corporation, specializing in the brokerage of privately funded mortgage transactions for real estate in Northern California, primarily in the greater Bay Area.  As you may know, Trust Deed investing, also known as “private” or “hard” money, is a niche alternative investment vehicle that offers an attractive return with the security of a Deed of Trust lien on the real estate collateral. We encourage you to call us at your earliest convenience to discuss private Trust Deed investing in more detail.  We can explain how you can enjoy tax-deferred interest income. We can also show you how even if a deal goes bad, you most likely will not lose a penny of your capital and you may actually make much more in the end. While nobody has a crystal ball, and we certainly will not pretend to know what will happen in the future, we do believe that there are trends in the market, both historical and current, that suggest that investing in real estate remains a secure and profitable investment option. Contact us today for your consultation!