Why Borrowers Use Hard Money Loans

Posted on March 17, 2016 By

Why Borrowers Use Hard Money LoansBad credit record

The easiest way to explain is bad credit record. If a borrower has damaged credit record it is very difficult to get loans through institutional or conventional lenders. Banks hardly look at the debtor and qualify them before looking at the collateral. However, hard money lenders are opposite. They always care about the property and make sure they are in a very strong position and less about the borrowers. Fret financial will make loans to borrowers with bad credit, but it is very rare.

Documentation of income

This is really a very popular reason for borrowing hard loans. Just like bad credit, it is also very difficult to get financing if you unable to prove your income. A borrower may have faced losses from investments several years ago and they are still writing off on recent tax returns. Hard lenders care very little about income and understand that self-employed debtors often have more income than they can show. Hard money financiers want to see solid deals and money in the bank. After having the conformation that the loan payments will be made based on the money the borrower currently has, lenders will do the deal.

Timing

This is one of the very popular reasons people work with hard lenders. Deals can get done very fast. In fact, sometimes they can get done within days. This timing option makes the offers stronger for the buyer. Having quick access to money, buyers get the confidence to go out and make a lot of low offers.

Comfort of doing business

Basically, traditional financing is much difficult to get even if you do qualify. The underwriters are always looking for reasons to refuse loans so they take a long time and collect a lot of papers. Hard money lenders look at the same documents but it is easier to work with them and they don’t try to kill the deal. Customer service is also better because you are dealing with individuals that understand the business.

Less money out of pocket

Hard money financiers generally will loan a much larger part of the purchase and repairs. Traditional lenders will want to see a big amount of down payments and They will rarely finance any of the repairs. If a borrower gets into a deal with a smaller amount of their cash, he able to do more deals and his ROI (Returns on Investment) will be much higher.

 

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