Hard Money Loans Vs Short Term Loans

To fully understand if there is a difference between a hard money loan and a short-term loan, one must first know what each of these are. When you hear the term short term, it seems self-explanatory. These types of loans come attached with a very quick repayment schedule and may mature in as quickly as a 90-day period. The overall fulfillment of the loan greatly depends on the amount that is being financed of course, but overall, the maturation rate is much less than that of a regular loan. On the other hand, a hard money loan is considered to be a type of asset based financing where someone would generally receive funds after putting up collateral – such as their home or land owned. Private investors and companies usually handle hard money loans and both loans are accompanied by higher interest rates typically because of the risk involved on the lender’s side.

Advantages of These Loans

The approval process for both a hard money and short-term loan is much quicker than that of a typical loan. With private investors and different companies, closing on a hard money loan may take less than a weeks’ time. In this type of scenario, people are placing their homes and real estate against the money being borrowed and although there is a quite a bit of risk involved for the lenders, they also have a great deal of collateral as well. This is beneficial to those who may have lower credit scores but have something to show for themselves.

The advantages associated with a short-term loan seem to make this a viable option for most people. These loans do not typically require any sort of collateral and have a quick application process. Since the application process is not lengthy, neither is the wait time for the money. When money is needed immediately, other than receiving a payday loan or cash advance on a credit card, a short-term loan is really worth looking into. Is commitment an issue but you still need cash now? A short-term loan allows you to receive the money that you need but at the same time not the commitment of having any long-term obligations.

Disadvantages for These Loans

Hard money loans are not the least expensive option to take and interest rates generally are in the teens. These particular type of loans are not usually the first option for the average person who works the typical nine to five and does not have quite a financial buffer as others may have. Another thing to consider is the fact that on both hard money and short-term loans, lending is usually over a very short term. Those who may find themselves struggling a little financially may find it difficult to abide by the strict repayment terms that accompany both of these types of loans. One more thing to consider with hard money lending is that they only lend a fraction of what your property may be worth. If your property is worth 60,000, they may only lend you 30,000. These are just a couple of things to keep in mind before applying for a hard money loan.

With short-term loans, a lender is more than likely to conduct a background check of your past credit history before approval. If your credit score is lower, there may be a possibility that you will not be approved for a short-term loan. As with most options in life, there are advantages and disadvantages to both of these types of loans. It is always suggested to find out as much information as possible to help you with your financial situation before making a decision on what will be the best option for you. Many trained professionals are more than willing to help you find a way to receive the money in your time of need.

loans - 24 Jan, 2014 - No Comments