Advantages of Hard Money Loans

The advantages of hard money loans can’t be understated. But, it’s very important to understand these products to get the best results. Hard money loans (also called private loans and bridge loans) are quite different from traditional financing. And, this is precisely what makes them so attractive, particularly to real estate investors. So, let’s take a look at the advantages of hard money loans.

Advantages of Hard Money Loans

Now, if there are benefits to hard money loans, you’re right to guess there are downsides. However, these aren’t a big deal. One small disadvantage is these involve typically higher interest rates but are short-term, anyway. That means another tiny disadvantage is private loans aren’t long-term debt instruments. Additionally, this type of financing usually requires a big down payment, ranging from 25 to 35 percent. But, the advantages of hard money loans can easily outweigh any downsides for the following reasons:


  • ● Super rapid funding. If you’ve obtained a traditional mortgage before, you know full well that gut wrenching feeling and all the hand wringing that comes with it. There’s seemingly no end to the paperwork, red tape, and other requests and requirements. But with hard money loans, lenders act much, much faster. The reason is simple: there’s no bureaucracy and lenders instead just concentrate on the liquidation value of the property. In other words, if the property claims a solid value, private lenders act quickly to provide financing.
  • ● Flexible terms. Another big obstacle to getting a traditional loan from a mainstreet bank is there’s always a catch. Whether it’s the interest rate, points, larger down payment, longer employment history, or other factors, eventually, there’s a catch. But with hard money loans, private lenders have the freedom to structure debt instruments which are more mutually beneficial to both parties. That’s a huge benefit, particularly to borrowers who enjoy more flexibility.
  • ● No prepayment penalties. One very unattractive and expensive feature of traditional loans are prepayment penalties. So, things go really well and you want to amortize it at a faster pace or all at once. But, when you inquire about doing so, you learn you’ll pay hefty prepayment penalties. However, with hard money loans, there are no prepayment penalties holding you back when you're ready to pay it off and move on to the next thing.
  • ● Approval when traditional lenders decline. Traditional lenders don’t cozy up to the risk that comes with a property flip. But, private lenders see opportunity and make loans available for these types of situations.For information about Texas Hard Money Loans see http://www.proactivelendinggroup.com

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