Debt has become a fact of life for the average American. According to the latest statistics from the Federal Reserve, consumer debt in the United States has continued to grow, reaching nearly $3.4 trillion in May 2015. As debt grows, it begins to get harder and harder for some to get loans to help relieve their financial burdens, or to pursue career or business aspirations.
That's where "hard money loans" come into play.
A hard money loan is a loan from private money lenders that is based on the equity in a household, or in a home. This money can be used for the purchase of real estate by investors, and are usually sought for their quick turnaround times (typically 7-14 days).
But who takes out hard money loans? And how does a hard money loan work?
Generally, private money loans are sought after by people having trouble obtaining loans from traditional sources, like a bank. These individuals can be business owners who need capital to expand, purchase new equipment, or similar business needs. They come to get the money from private lenders because they might have been denied at the bank.
It might also be an investor, who wants to purchase a property, renovate it, and then sell it at a profit quickly. Since the funds from a hard money loan are meant to be used quickly, they're great for individuals that just need a quick cash influx.
Hard money loans can take possession of whatever collateral was used to back the loan in the case of a default. Which is why having a solid plan in place when taking out a loan is recommended.
There are a lot of benefits to this type of loan system if you have a clear objective in mind on what you want to use the money for, and have an idea of how you're going to turn it around to make a profitable investment. Due to the higher interest rates, and faster turnaround times with shorter loan periods, it's recommended that only experienced individuals, with equity, take out these types of loans.
If you have any questions about hard money loans or private money lenders, and their benefits compared to standard loan providers, feel free to contact us. We'll be happy to help.