Money makes the world go round. It can also bring things to a complete stand still. The money that consumers borrow from private lenders is used for homes, college educations, and many other purposes. And while the majority of loans that are offered are traditional offerings with manageable interest rates, there are special kinds of loans that help lenders speed up the world that they live in. If, for instance, you a lender wants a quick loan to purchase and remodel a home, hard money loans are often the choice.
Private loans from private money lenders often have higher interest rates because the intent is that the project will be completed on an expedited pace and the property will be quickly sold with a goal of both paying of the loan within one or two months, showing a high level of profit. With a team experienced in renovations, it is possible for many of these lenders to get the funding that they need from private lenders, make a quick profit and move on to the next opportunity. The property itself is offered as collateral, which also means that the loans can be quickly secured on a very short time table.
Although private loans may come with higher interest rates, they also have many advantages. From a shorter waiting period to the fact that they do not always require collateral beyond the property itself, these loans are the solution for many lenders. Consider these facts and figures about the lending industry:
- Keeping the investor well protected, most hard money loans are secured by a property with 30% to 50% equity.
- The latest Federal Reserve statistics indicate that consumer debt in the U.S. continues to increase, reaching nearly $3.4 trillion in May 2015.
- With a goal of seven to 14 days to process, hard money deals are often sought after for their quick turnaround.
- The median amount of home equity for people below 34 years and younger totals $20,000.
- Hard money interest rates can start at 15%, 18% or higher, and offer higher interest rates and lower loan to value ratios.
Private money loans are an options for some people who are looking for a very specific kind of loan. The higher interest rates on these loans mean that they are typically used for shorter term loans.