When financing a home, you may need a way to get the money quickly, in the hopes that you can pay it back in a short time frame. This makes a hard money loan perfect for these situations. However, a hard money loan will come with disadvantages as well. Here are some of the pros and cons of hard money loans to help you decide if a hard money loan is right for you. Pros:
- Fast: A hard money loan can be approved and moved forward with fairly quickly. This means you can get the money you need to buy a property quickly, so you can get to work on it.
- Approval: Being approved for a hard money loan can be easy if you have the collateral. You can have a negative credit history and other similar problems on the record, but if you have collateral for the loan you may be able to get approved for the loan.
- Flexible Payments: With a hard money loan you may be able to tweak and change the payment schedule for the loan. This can be advantageous for you if you need extra time before the property you buy with the loan can start adding income to pay off the loan with.
- Interest: Interest rates on a hard money loan can be incredibly high. Significantly higher than for a mortgage. This can start to add up and be difficult to bear if you struggle to pay off the loan in a short amount of time.
- Approval: The approval process for some can be easy, but for others it can be difficult. If a lender does not see reasonable collateral or profitability, then it may be hard for you to get a hard money loan.