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How to Make Good Use of the Money Loaned?

Loans are types of debts that involve monetary exchanges. The creditor lends money to the debtor who in turn repays the same with interests. Loan itself has different types. The most common of which are the secured loans or loans with collateral or mortgage and another type of loan that does not involve any security which is also called unsecured or personal loans. A secured loan has lower interest rate since the creditor has certain security that the loaned amount will be repaid either by the same principal obligation or through the accessory obligation by foreclosing the said mortgaged property. The amount of loan granted to anyone who applies for a loan with collateral or mortgage depends on the value of the property used as a security or accessory obligation. Unsecured loans, however, have higher interest rates due to increased risks on the part of the creditor. The creditor would want that such risks be compensated and the principal be paid quickly hence this type of loan entails higher interest rate and a relatively shorter period of terms of payment. The amount of loan granted for an application for unsecured loan depends on the personal background of the applicant. This personal background pertains to the person’s credit history, capability to pay, monthly income, and current financial condition.

Whatever type of loan one obtains, it is very important the he or she makes good use of the loaned amount. If the person has several debts, the said loan can be used to consolidate these debts and maintain one principal debt to lower the interests he or she is paying every month from these various debts. A proper debt consolidation plan must be availed by such person to ensure that his or her debts are paid off strategically. If the person obtains a loan for the purpose of securing additional purchasing power and an emergency cash savings, it would be best that the person first consider another type of loan which is the home equity loan. A home equity loan offers a credit line where one can withdraw in a staggered basis the approved loan amount. In this case, only the withdrawn amount shall incur interest. Further, to ensure that these money are spent wisely, it is also highly recommended that the person obtaining such loan observe proper personal finance and seek other tips and strategies from financial advisers to ensure a sustainable financial stability.

Having mentioned all of these, it is but apparent that the money loaned really provides financial relief on the part of the debtor. However, such relief can be for a short or long term. The manner and purpose of spending the money loaned is crucial in ensuring that such loan will certainly benefit the person for long. Hence, it is advised that prior to obtaining a loan, one must first determine the objectives and main reason for applying for the same. Upon approval, he or she must maintain focus on these objectives so that the money will be used wisely to reap benefits both at present and in the future.

Bad Credit Hard Money Loans for Funding Your Next Fix and Flip Deal

The shakiness of today’s real estate market is pretty obvious to everyone. This is ultimately creating difficulties in finding loans for flipping properties as well and if your credit score is bad, then the situation becomes worse.

But you don’t need to worry because as a real estate investor, your ONLY job is to find good investment opportunities. If you will keep wasting your time looking for a lender instead of finding good fix and flip deals, then you are going to end up in a problem. You need to understand that if you have found a hot property, it will draw the attention of money lenders itself.

After finding a property and making sure that it is worth investing, you need to get in touch with your local lenders. It is necessary to have a sound relationship with the right hard money lender because of two basic reasons:

1. They will fund you if you have found a good deal, irrespective of your bad credit

2. They will also advice and educate you through the whole process of buying and selling your real estate investment deal

Finding money lenders for bad credit isn’t very difficult if you’ll do your research properly and it is better to start this search by contacting your own lender.

But don’t give him a call asking about what-if or imaginary situations or if they will lend you on that with bad credit or not. As an alternative, you can check their website and look at the properties they have recently funded and try to find similar properties for investing.

Every true hard money lender put all these information on their website to make things visible to their customers. You can get all the details about those funded properties on their website.

The next important step that you should take is getting a proof of funds letter. While you are trying to find a good deal and planning to take it under contract, there are people who would like to know that whether you have finances available to invest in the deal or not. For that, you need to show them your proof of funds letter.

You can easily get a proof of funds letter after paying a minimal fee to your lender. You need to understand that it doesn’t guarantee you that you will get your financing. But it gives a guarantee that there are funds available for that specific property if it gets under contract.

If you really want to get bad credit hard money loans for your property, then you need to follow every rule and regulation set by these lenders. It is very important that the property you are willing to buy meets their guidelines. You also need to check their website to know what are the states or counties, they do lend in and what types of properties they are looking for i.e. commercial or residential.

You need to make sure that you are meeting their requirements and hence, playing by their rules. If you are having difficulty in finding good properties, then your lender can always help you with that by giving you some really good advice as they are experts of real estate investing business.

Hard Money Loans – The Last Resort

Difficult to come buy and carrying a high price, hard money loans are the last resort for those who can afford it.

Let’s start with a quick comparison of conventional loans to hard money loans to create a distinction up front.

Conventional loans are the tool of most home buyers. Lending institutions loan money to the buyer based on credit history and income. Hard money loans are less dependent on credit score and revolve around assets, instead. There should be no confusion that one is a substitute for the other. When buying a house there are many choices in loan options, but the choice between conventional or hard money is not one of them. Hard money loans are for unique, often distressed situations.

Hard money comes from private investors who can take the time to assess a borrower’s entire situation, in a way that traditional lenders cannot. The private investor understands that a few missed payments resulting from something like loss of employment, does not mean the buyer cannot repay his loan. This is a perfect scenario of when hard money works. When the homeowner has fallen so far behind on his mortgage that he cannot catch up even though he has gone back to work and resume payments, the private investor can come in, provide hard money to pay original mortgage off, offering the borrower a chance to start fresh and preserve his credit. Soon the damages of the missed house payments are repaired on his credit report and he can refinance in a traditional manner.

The reason for refinancing as quickly as possible is that hard money loans carry stiff terms. Interests rates average between 10% and 18% making it a costly option, albeit a valuable one.

Another motivation to use hard money which is relevant in markets driven by foreclosures is rehab purchases. Investors find a great property to renovate quickly for profit and they want the loan fast because there is already a buyer for the house when it’s done. The hard money loan is available much quicker and without the red tape of a traditional loan.

Don’t be confused, though, hard money loans are not a simple alternative for those with poor credit. Even private investors aren’t interested in a borrower with a history of bankruptcy or non payment. In addition, the closing costs on a hard money loan must be paid up front. These fees could be a couple hundred dollars or a couple thousand, making the hard money loan a non choice for most borrowers in distressed situations.

Hard money loans are difficult to come by. The loan to value rate is a relatively low 50 to 75%. Hard money lenders like to only finance properties that are nearby them in areas they are familiar and comfortable with so they can monitor the property. Be wary of a hard money lender who makes things look too easy and shiny, as there are individuals who prey on homeowners and set up situations that guarantee failure so they can seize the house and profit from its sale.

If you fit into one of the unique scenarios that would benefit from a hard loan, do your research before signing any papers. Get recommendations on the private lender when you can. With no bank regulations on private lending the only one who can separate a legitimate lender from a loan shark is you.