Hard Money High Interest Explained

The interest rates given by hard money lenders are usually twice that of traditional lenders such as banks

. However, successful investors still prefer using hard money over other forms of loans whenever they flip or wholesale houses. Why? Because a good investor looks at the rate of return, not the interest rate.

The logic behind this creative financing is that the profit in flipping houses should be huge. For instance, if you will earn a 50% rate of return from a deal, would it still matter if you pay back an 18% interest rate?

For those who advise against this practice, it would seem as if it is a crazy idea to opt for an 18% interest rate over 10%. That is, if you dont consider the time element. Hard money loans are released in just days, compared to traditional loans, which may take weeks to process. Take note of the word process, which means its approval is not always guaranteed.

Unlike banks and other lending institutions, hard money lenders usually operate on their own. That means that if you manage to convince the lender, then you get the loan. This swiftness element makes it more appealing, if not suitable for wholesaling and flipping houses, a business that operates on a relatively fast timeline.

Hard money is also ideal for those who have low credit scores but have a knack for good deals. Lenders in this business assess borrowers based on the deal they have and not on their credit scores. So if a lender approves your application, that means you bagged a good deal and the house you will flip or wholesale indeed has a potential to give you profit. Otherwise, hard money lenders would not approve that property as collateral for the loan.

Hard money lenders are scattered across the country. You can check RehabHardMoney.com. The web site offers loans for investment properties. www.RehabHardMoney.com also serves as a meeting place for thousands of hard money borrowers and lenders nationwide.

by: Carrie Dawson

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