If you need to acquire money quickly for large purchaseor project, and/or you don't qualify for a traditional loan with your credit history, a hard money loan may be a viable alternative to secure the money you need. A hard money bridge loan is secured with the equity in an existing property, meaning that your credit history or ability to pay are not factors in your approval. Rather, a private lender will consider the equity that you have in your home as the most important criterion.
Benefits of Hard Money Loans
Hard money loans offer many potential benefits, especially for people who don't qualify for traditional loans or mortgages:
A hard money lender isn't bound by the same rules and regulations that a bank or corporate lender would have to follow, meaning that you may be able to negotiate more agreeable terms on matters like repayment schedules.
There are many uses to which you can put a hard money loan: fixing and flipping a property, home renovations, a bridge loan to help you purchase a new house with no contingencies, etc.
It is usually quicker to obtain a hard money loan than a traditional mortgage. For an investment property, it could be a matter of days. If you intend to occupy the property, however, approval could take several weeks due to federal regulations that apply.
Drawbacks of Hard Money Loans
For all their potential benefits, hard money loans aren't for everyone. There are some potential drawbacks as well:
Lack of Oversight
Because hard money loans are obtained from private lenders, the government exercises little regulation or oversight over them, which means it is easier to become the victim of a dishonest lender.
High Interest Rates
Interest on a hard money loan can range from 9 percent to 15 percent, considerably more than what most mortgage lenders charge.
A short loan term can be both a benefit and a drawback because you get rid of your obligation more quickly, but you pay more per month as a result.
Hard money lenders in Los Angeles are available for those who believe it would benefit them. Contact a lender for more information.