Mistakes to avoid with hard money

Hard money loans look appealing to many due to the simplicity with which they come. No red carpet and credit score don’t determine the outcome. All you need to have is collateral that has a value proportional to the amount of loan you’re seeking.

Are you seeking a construction loan or some serious renovations? A hard money loan will come in handy. It’s a different loan from the standard mortgage with fewer regulations. 

Hard money loans are a “double-edged sword”- in as much as they are easy to get, chances of making financial mistakes are higher than traditional ones.

This article outlines some mistakes you must avoid when seeking a hard money loan.

Giving the Wrong Information

When applying for this type of loan, you’re required to provide an array of information. Depending on the loan purpose, you’ll need to supply several documents which will help the lender determine your financial standing. You will be required to provide some months’ account statement and two or three years’ tax return records.

The information you provide determines the loan amount you qualify for. Giving the wrong information leads to the incorrect assessment by the lender. Thus you may be given a loan amount that you’ll repay with difficulties. That will bring problems in your future applications.

Choosing a Rogue Lender

Another financial mistake that most borrowers make is failing to do enough research for a reputable hard money lender. Sometimes you may get an email in your spam mails, and you go ahead to engage the lender. Any mail or text by a marketer should be taken with a pinch of salt. Don’t just jump into signing for the loan facility with a financier that you’ve not checked with the regulator and from their client’s feedback.

Find out how long the hard loan lender has been in business and whether they specialize in hard money loans or not. That way, you know you’re dealing with the right lender.

Having No Budget In Advance

“Money has wings; it can fly.” That saying is so relevant when it comes to ‘quick money’ like hard money loans. Thus before you approach the lender, you must have a budget of what you want to do with the amount. Is it a house you’re renovating or it’s for construction? You must have every single coin budgeted for, so you use it for the intended purpose when you get the money. 

Without a budget, the chances are that you’ll use the money for other things, and that’s what makes many borrowers struggle in repaying.

A budget also shows the lender that you’re a serious borrower, and they’re sure they will get their money back in repayments.

Ignoring the Interest Rates

Hard money loans are quick loans and high-risk and therefore charged higher interest than ordinary bank loans. Every loan is charged a certain percentage of interest rate. Therefore, before you sign that offer, you’ve to be aware of the interest amount and compare as many lenders as possible.

Do not jump into getting a hard money loan from any lender. Choose reputable fast hard money loans Spartanburg, SC lenders who have years of experience in lending. Make sure you’ve your budget ready before you go for the loan to avoid misappropriation of the funds.