Busting The Common Misconceptions About Hard Money Loans

By Author: Chris Goulart
Total Articles: 2
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Hard money loans and lenders are often surrounded by misconceptions. But such loans are one of the most efficient financing avenues available. Hard money loans are flexible, can be quickly approved and can be structured in a way that allows a borrower to keep their existing bank loan.

Hard money lenders often deal with certain misconceptions. These misconceptions, however, are not always well founded. Following are some of the most common misconceptions about hard money loans that need to be addressed.Understanding how hard money loans can fit into an overall investment strategy may even bring you to the realization that a hard money lender can be the best financing option for you.

Misconception #1 – Only desperate people use hard money loans.

Most people have a notion that only desperate peopleuse hard money loans. The misconception is mostly due to the higher cost of the loans. However, the truth is smart business people often opt for hard money loans from private investors to do their business. Hard money loans get approved faster and fund faster thangoing through the banks. These loans also offer flexibility ...
... that the institutional loans do not. Thisspeed and flexibilityis valuable for the professional real estate investor.

Misconception #2 – Hard Money lenders are loan sharks.

Another misconception about hard money lenders is that they set hard and impractical loan terms that the borrower cannot pay back. However, that is not the case! Most hard money lenders do not want to take property back, it is simply the collateral for the loan. More often than not, they look for borrowers who are highly likely to pay the loan back. In exchange for fast funding for unique situations, these private investors are making a better return than they would by keeping their money in the bank.

Misconception #3 – Hard money loans are highly expensive.

It is true that the interest rates on hard money loans are higher than the traditional loans. But in the long run you save a lot of money. For instance, if you need money fast so that you can buy and flip a property for substantial profit, then hard money loans are your best bet. In such scenarios looking for traditional loans can just be a waste of time - you may miss out on profits!The higher cost is offset by the opportunity non-traditional funding allows for.

Misconception #4 –You cannot take these loans with existing bank loans.

The truth is there is that you can take hard money seconds even when you have existing bank loans. Many times people who have existing bank loans with good terms need to access equity fast to take advantage of a business or investment opportunity. In such scenarios hard money seconds play a vital role. On California hard money seconds borrowers keep their existing loan and terms. The seconds come in subordinate to the existing financing – and then when they are paid off, the existing financing remains with terms untouched.

Author Information:

The article is written by All California Lending, a company that specializes in hard money lending and commercial loans. They also offer hard money seconds that subordinate the existing loans.