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Hard Money Lender Investors

Tips for Working with Hard Money Lenders

Posted by Ken Meyer on Tue, Jun 17, 2014

hard money lendingFor those borrowers new to hard money lending, there are increasingly more lenders springing up eager to capture your business. While the process of obtaining a hard money loan is neither complex nor difficult to come by, you do want to educate and prepare yourself so that when you need to pull the trigger on getting your hard money loan, you can act swiftly. Here are some simple tips to help you out.

Know the Process - Before you even decide to enter such a loan, knowing how it works will help you in devising an effective plan of attack. Hard money loans are basically loans that require borrowers to leave tangible property (real estate) as a form of collateral. This is different from other types of loans in that the value of the property is the one that determines the viability of the loan and not the borrower’s current credit standing.

Another point worth mentioning about hard money loans is that, unlike regular credit loans provided by banking institutions, the funds are taken directly from the pockets of the lenders themselves. As such, in order to protect their investments, lenders impose much stricter terms, such as a tighter payment deadline for the forfeiture of property placed as collateral. However, since they are not governed by banking laws, lenders can be more flexible with the loan terms to make it a win-win for both the borrower and the investor.

Negotiating the loan – One of the biggest advantage of going to a hard money lender is that you don’t have to go through lengthy bureaucratic procedures just to apply. Since these lenders are often just small businesses, you can easily find the correct person to discuss rates and fees. However, even with this opening, it would be unwise to immediately seek a meeting with them. Here, it would be better to know as much as you can about their business operations first. Luckily, since these are often small scale operations, gathering needed information from others who have already transacted with them is fairly easy. Some lenders are also kind enough to publish their rates online although hard money loan rates can vary with each loan scenario. You may need to be flexible during the actual negotiations since the terms you hoped for may not be realistic based on your unique criteria.

Once the talk is underway, it is important to show that you are indeed going to be a viable lending prospect. While it is not always necessary, presenting a credit report showing a good standing can sometimes swing negotiations to your favor. Emphasizing the positives points of the property you are giving as collateral, such as its potential resale value, will also make your case even stronger in the eyes of the lender.

A few more pointers - Since hard money loans often have a much higher interest rate than regular bank loans, repaying it as quickly as possible is certainly a must. As such, be sure to diligently meet agreed upon payment deadlines, as well as report to the lender on a regular basis, so that they know that you are indeed keeping up with everything. Having a good transaction record can also help you negotiate a possible extension in case it can’t be completed on time, as long as you provide a valid reason.

If you are seeking a reliable hard money lender to deal with, feel free to contact us today.

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