A lot of myths surrounds hard money loans, and many people who would benefit from a hard money loan are put off by the stigma that surrounds them. Here are six myths about hard money loans.
1. Myth: Hard Money Loans are Risky
One of the most commonly held beliefs about hard money loans is that they’re risky. This is simply not true. Hard money lenders are usually lending out their own money, which means that approving a risky loan isn’t in anyone’s best interest. Even if the deal looks amazing on paper, a hard money lender will make sure the market is right to support the loan.
2. Myth: You Don’t Need Documents for a Hard Money Loan
The myth that you don’t need any documents for a hard money loan comes from the fact that hard money loans are often more lenient than conventional loans. However, with any loan you will need documentation to qualify.
3. Myth: You Have to be Desperate to Get a Hard Money Loan
Because hard money lenders are more lenient than conventional lenders, many people think you must be desperate to get a hard money loan, or that you can’t qualify for a traditional loan. This is not true. Many people choosing to get a hard money loan over a conventional loan are doing so because of the fast-closing time, types of loans, and more flexible terms.
4. Myth: Hard Money Loans are More Expensive than Conventional Loans
Hard money loans do tend to be more expensive upfront. However, the shorter terms without prepayment penalties mean that you can potentially pay off the loan faster, with less interest in total. You can also usually get a higher percentage of your project’s total cost, so you need to invest less of your own money. These perks can make hard money loans a less expensive choice overall.
5. Myth: Hard Money Loans are a Trap
Hard money loans should always have an exit strategy. If your lender doesn’t seem to care about how you will pay back the loan, you should find a new lender. Whether you are flipping a property, renting it out, or refinancing, you should have a solid strategy before attempting to take out a hard money loan.
6. Myth: Hard Money Lenders are Loan Sharks
Hard money loans have a somewhat notorious history when compared to conventional bank loans. However, they have become more and more mainstream, and there are huge hard money loan companies now that can compete with banks for your business.
There are definite pros and cons to both conventional loans and hard money loans. If a hard money loan is better for your project due to its flexible terms, fast closing time, and covering more project costs, you shouldn’t be deterred by outdated myths.
Tidal Loans – Hard Money Loans
If you are considering hard money loans for your projects, make sure to find a reputable lender like Tidal Loans and have your documents, plans, and expectations in order before meeting with them.
If you are looking for a hassle-free hard money lender, contact a member of the Tidal Loans team today and let us know how we can exceed your expectations!