One has probably heard about hard money loans wherein people would get funds with a piece of real estate as a collateral. Now hard money lenders new york city would actually make a lot of money because they would charge very high interest rates. Now if one is not familiar with these types of lenders, then here are some things that one should know about them.
Now one would probably ask himself what the difference is between these types of loans and the normal loans with property as a collateral. Well the first difference would be the interest rates of these two loans. The former would have extremely high interest rates while the latter would have the normal interest rates.
Now the hard loans would make use of the real estate of a borrower as a collateral. However, the difference between this and a normal loan with collateral would be that a normal loan would make use of the market value of the real estate. In the event that the borrower cannot pay, the bank will just take his property and use the value to pay the loan.
Now the hard loans on the other hand, would make use of future value instead. When one would say future value, it means the value of the real estate when it is already done up and repaired. Now the risk on the part of the lender here is that if the borrower does not pay, he may get stuck with a piece of real estate that is not worth much.
Another difference between hard lenders and normal ones would be the fact that the normal ones would look at the credit rating of the borrower. Unlike the normal ones, the hard ones do not care about the credit rating of the borrower. What the latter one would care about would be the returns.
As stated above, they would first assess the future value of the real estate to get an amount. Now if they would see that the return is rather high, then they will permit the loan. When that is done, the borrower would have to sign a contract wherein the borrower agrees to give the property if he does not pay.
So by taking a look at what these lenders would have to offer, many would ask why they would want to avail of such loans. Well many people avail of these loans because they do not need a good credit rating to get it. If they need cash right away and have some good property, then they may take this loan so that they do not need to wait for approval from the bank for a bank loan.
So as one can see, these types of lenders can be quite helpful to those who need money right away. However, do take note that they do not all have a standard rate. Their rates would all differ as they would be the ones who would decide how much they are going to charge.
Now one would probably ask himself what the difference is between these types of loans and the normal loans with property as a collateral. Well the first difference would be the interest rates of these two loans. The former would have extremely high interest rates while the latter would have the normal interest rates.
Now the hard loans would make use of the real estate of a borrower as a collateral. However, the difference between this and a normal loan with collateral would be that a normal loan would make use of the market value of the real estate. In the event that the borrower cannot pay, the bank will just take his property and use the value to pay the loan.
Now the hard loans on the other hand, would make use of future value instead. When one would say future value, it means the value of the real estate when it is already done up and repaired. Now the risk on the part of the lender here is that if the borrower does not pay, he may get stuck with a piece of real estate that is not worth much.
Another difference between hard lenders and normal ones would be the fact that the normal ones would look at the credit rating of the borrower. Unlike the normal ones, the hard ones do not care about the credit rating of the borrower. What the latter one would care about would be the returns.
As stated above, they would first assess the future value of the real estate to get an amount. Now if they would see that the return is rather high, then they will permit the loan. When that is done, the borrower would have to sign a contract wherein the borrower agrees to give the property if he does not pay.
So by taking a look at what these lenders would have to offer, many would ask why they would want to avail of such loans. Well many people avail of these loans because they do not need a good credit rating to get it. If they need cash right away and have some good property, then they may take this loan so that they do not need to wait for approval from the bank for a bank loan.
So as one can see, these types of lenders can be quite helpful to those who need money right away. However, do take note that they do not all have a standard rate. Their rates would all differ as they would be the ones who would decide how much they are going to charge.
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