5:45 PMComparing Conventional Loans To Hard Money Commercial Loans
Comparing Conventional Loans to Hard Money Commercial Loans
Hard money commercial loans are a form of financing where a borrower get funds from the lenders based on a particular value of a commercial real estate. Such loans don't originate from any conventional institution or bank so expect to get them from only private investors through local brokers. Probably you are wondering why traditional and hard money lenders have different terms, yet they both concentrate of financing its borrowers. Take a look at the following comparisons to point out where the preferences set in if you in a crossroad of choosing one. Though other factors like city regulations, market trends, property type and availability of lenders influence the terms of the lenders, there are bottom line guidelines where each operates on.
Credit score; if you opt for a conventional loan, the credit score should be good and its the one to determine the amount you qualify and the rate you will pay at. Contrary to Hard money commercial loans, any credit score is accepted. It is not used as a base to get their loan as they are most interested in the commercial property you want to acquire.
Purpose for taking the loan; conventional institutions must verify the matter for which you are taking the credit. The amount disbursed to may have limitations or restrictions on the purpose you sought for it only. Contrary to hard money, they care less about the use you are looking the loan for. The use of the borrowed money is at the discretion of the borrower without raising any question in any circumstance, unlike the conventional ones that may frequently visit to ascertain if its being used in the initial purpose it was borrowed for.
Repayment period; conventional loans can be serviced for up to 40 years depending on the borrowed amount. This is ideal for long-term projects as the interest is spread evenly across that period and won't prove to be hectic to the borrower. It is the better option on projects that will bring impact after later rather than immediately. In hard money commercial loans, the maximum period is five years. That is why it is a short time financing option. It is the short time that makes you the borrower pay massive amounts of money in monthly packages due to the time frame. It is better using it for projects that will bring impact immediately to enable you to finance repayments without fail to avoid penalties and extra fee in the case of default.
Do the three comparisons ring a bell in your mind? Pointing the merits and demerits in each scenario is easy. Take time, consult and go for what will satisfy you.
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