The 3 Best Times to Use a Hard Money Loans
When it comes to financing a property purchase, there are a lot of options available. In many cases, a hard money loan is the best choice. This guide explores the three best times to use a hard money loan.
What is a Hard Money Loan?
A hard money loan is a type of short-term loan that is typically used by investors to purchase properties. Hard money loans are usually funded by private investors or groups of investors, as opposed to banks or other financial institutions.
One of the main advantages of hard money loans is that they can be obtained quickly, often within a matter of days. This is because hard money lenders are primarily interested in the property being purchased, rather than the borrower’s credit score or income.
Another advantage of hard money loans is that they can be used to purchase properties that traditional lenders would not finance. For example, if an investor wants to purchase a property that needs significant repairs, a hard money loan would likely be the best option.
Related: The easy guide to buying and flipping a fixer-upper
The 3 Best Times to Use a Hard Money Loan
Check out the three best times to use a hard money loan:
- When a borrower needs funding fast
- When an investor or group of investors wants to purchase a property to flip
- When a borrower has a less-than-perfect credit score
Here’s a closer look at each.
Using a Hard Money Loan When a Borrower Needs Funding Fast
One of the main advantages of hard money loans is that they can be obtained quickly. If you need to purchase a property quickly and traditional financing is not an option, a hard money loan may be the right choice.
For example, suppose you find a property that you want to flip. The property is being sold at a below-market price and you need to act quickly to get it under contract. In this case, a hard money loan would likely be the best option since you could have the funding you need within a matter of days.
Related: The 7 upgrades you should make to every flip
Using a Hard Money Loan When an Investor or Group of Investors Wants to Purchase a Property to Flip
Another great use for hard money loans is when an investor or group of investors wants to purchase a property to flip. In this case, the lender is primarily interested in the value of the property, rather than the borrower’s credit score. This makes it easier to obtain financing for the purchase.
Additionally, hard money loans can be used to finance properties that need significant repairs. This is often the case with properties being sold at a below-market price. By using a hard money loan, the investor can make the necessary repairs and then sell the property for a profit.
Using a Hard Money Loan When a Borrower Has a Less-Than-Perfect Credit Score
If you have a less-than-perfect credit score, you may still be able to qualify for a hard money loan. This is because the lender is primarily interested in the value of the property being purchased, rather than the borrower’s credit score.
For example, suppose you have a credit score that wouldn’t qualify you for a conventional loan. However, you find an investment property that you want to purchase. In this case, a hard money loan would likely be the best option since the lender would be more interested in the value of the property than your credit score.
Related: How to find the best hard money lender
How Do You Know if a Hard Money Loan is the Right Choice for You?
Now that you know the three best times to use a hard money loan, you may be wondering how to know if a hard money loan is the right choice for you.
Here are some questions to ask yourself:
- Do you need funding fast?
- Is the property being sold at a below-market price?
- Does the property need significant repairs?
- Do you have a less-than-perfect credit score but want to purchase an investment property?
If you answered yes to any of these questions, then a hard money loan may be the right choice for you.
Do You Need a Hard Money Loan?
Paces Funding is the top hard money lender in Georgia, North Carolina, South Carolina and Tennessee. Apply for a hard money loan here or click through our site to find out how we can help you now!