Before you apply for financing through a California Private Hard Money Lender it is important to consider the advantages and disadvantages of doing so.
Back in the old days, when it came to financing options you had the bank down the road, the bank your friend uses, the one your cousin twice removed works at, and the bank that your Mom and Dad have used since you were a kid. Nowadays, those options are still viable, but there are many more open to wannabee investors and entrepreneurs—especially those with bad credit.
So when all you had to do before was decide which bank you wanted to try, now you have several options to consider. For those with a troubled credit history, the banks are no going to be too kind, but private lenders—such as California Private Hard Money Lenders—will be more forgiving.
But before you get the ball rolling it would be a good idea to evaluate the advantages and disadvantages to working with a California Private Hard Money Lender.
There are three primary advantages to working with a private hard money lender:
1. Speed: traditional financing options take time and have quite a few hoops to jump through just to be considered. Just because you do successfully navigate the process doesn’t mean you will get approved. Private hard money lenders are more likely to approve your loan and will do so quickly. It is not unheard for the process to begin and money to be in hand within 3-5 days.
2. Fewer requirements: With a traditional loan you will have to provide all sorts of documentation just to be considered for a loan, but when you work with a California Private Hard Money Lender you will not have to jump through nearly as many hoops. Even if you do have some of the issues that would normally cause a bank to reject you, hard money lenders are less likely to do so.
3. Hard money lenders will finance what banks will not: there are some projects that banks will not consider getting behind, no matter what your application looks like. If they perceive there to be too much risk, they will not want to get involved. Private hard money lenders, on the other hand, will finance the projects banks will turn down.
1. Interest rates: Banks are okay with making a little interest over a long period of time on less-risky opportunities. However, your California Private Hard Money Lender will want to be compensated for taking a chance so they will charge higher interest rates.
2. Shorter terms: As if paying a higher interest rate wasn’t bad enough already, but you will have less time to pay a private hard money loan back than you would a traditional loan. Often times, they will be for anywhere from a few months to a couple years.
3. Down Payments/Equity: While a banks approves a loan according to your credit score and income history (among other things), a private hard money loan is asset secured. While they are willing to take on the risk involved with a loan, they don’t want all the risk. So they will usually require you to put down a substantial down payment or to have sufficient equity in the investment.
Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true.
Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.