Which type suits you?
How are hard money loans different from traditional loans?
Hard money loans are different from traditional loans in several ways. For example, while a person may be able to repay a traditional loan in thirty years, hard money loans typically have a repayment plan of around 3 years or less.
There are many benefits of a hard money loan which may encourage borrowers to prefer it to traditional loans. For example, even if you don’t have a very good credit rating, you can still qualify for a hard money loan, experts say. While traditional lenders largely depend on a person’s credit score to approve their loan applications, hard money lenders may not be as choosy when it comes to credit scores.
Types of hard money loans
Hard money loans come with different types of financing options, some of which include:
1. Transactional loans
This type of loan offers short-term capital to investors. They are a quick and easy alternative to traditional loans. The whole process of obtaining a transactional loan is fast, allowing investors to obtain a loan in as little as one business day. These loans are designed to provide investors with short-term capital so they can close deals quickly.
What kind of investors need transactional loans?
Transactional loans are certainly not the best types of loans for all situations, however, there are situations for which these types of loans are best. These loans are ideal for investors who have found buyers willing to pay much more for a property than its price. In this type of situation, an investor could buy the property using a transactional loan and then resell it to the buyer. The investor would then repay the loan using the proceeds of the sale and keep the difference as profit. These types of transactions happen very quickly.
Advantages of transactional loans
Transactional loans can benefit an investor in several ways, some of which include:
- With this type of loan, the borrower is approved based on the current contract and not based on their credit rating.
- Transactional loans allow an investor to take out a property without having to earn the capital themselves.
- Being able to bring in 100% of the money in one day gives an investor an edge over other interested buyers.
- This loan allows investors to finalize deals very quickly.
- It gives investors sufficient financial support to complete several transactions at the same time or in a short time.
2. Bridging loans
As the name suggests, bridge loans are granted to investors to bridge a period between two transactions, such as transactions involving the purchase of a property and the sale of the same property. The bridging industry has evolved enormously over the past decade. Today, bridge loans are taken out by companies and individuals who need quick approval for real estate financing. When managed wisely, bridge loans can help investors generate a lot of profit in a very short time. It takes about a week to process this type of loan
What kind of investors need bridging loans
Many investors benefit immensely from bridging loans. From managing rental properties to repairing and returning, bridging loans come in handy. house flipping is increasingly popular as a great investment because it gives good returns on investment; this made bridge loans even more popular.
Advantages of bridging loans
Here are some reasons why you should choose bridge loans over other types of loans.
- Unlike traditional loans, bridge loans are approved very quickly and you won’t have to wait up to two weeks to get one.
- Bridge loans have easy-to-follow repayment plans. This loan offers you the possibility of paying only interest until you have made a profit on your investment to repay the principal.
- It is easier to qualify for a bridge loan, compared to traditional loans.
3. Rental loan
This type of loan is available for people who want to buy a property to rent. Lease loans are generally tailored to the unique needs of each investor, whether they are a veteran or new to the industry.
What kind of investors need rental loans
This loan is best suited for people who want to get into the highly lucrative business of buying rental properties. This type of investment requires a lot of capital both for the purchase and for the rehabilitation of properties and rental loans are a great way to obtain this capital.
Advantages of rental loans
- These loans are processed faster than traditional loans
- They are flexible and have the possibility of long-term financing
- With their fast processing times, investors can complete their plans quickly and start earning profits in no time.