Investors often undergo a wide range of financial challenges. As a result, they resort to loans to prevent their projects from floundering. However, many of them struggle to choose between traditional loans and hard money loans. Read on to learn the three most significant differences between the two.
One of the biggest differences between traditional bank loans and hard money loans is their application process. Traditional bank loans have standard application and loan approval guidelines. Most traditional lending institutions or banks require applicants to complete a comprehensive application form and submit an excessive amount of documentation, including credit reports, employment status, home ownership documents, national identification documents, and more.
On the other hand, the application process for acquiring hard money loans is simpler and a lot more straightforward. These loans require less documentation and offer fast funding through an easy application, inspection, and closing process.
Just like the application process, the approval requirements for traditional loans are often complex, especially if an applicant fails to meet their eligibility requirements. Some of the things that banks assess during the process are the applicant’s debt to income (DTI) ratio, and overall financial position. Furthermore, it can take up to two months or more for a traditional loan to be approved.
However, hard money lenders only look at the investor or applicant’s loan to value (LTV) ratio to assess their needs. Applicants must submit a property appraisal when applying for a hard money loan. If the asset you’re investing in can cover the loan’s value, your loan request is highly likely to be approved instantly.
Lastly, a significant difference between both lending methods is their flexibility. Traditional banks operate under stringent rules and regulations. As a result, they cater to every loan application through the same lens without considering their circumstances and investment goals.
On the other hand, hard money lenders operate privately. Therefore, they have the autonomy to customize their loans, their duration, and repayment requirements according to their client’s financial goals and conditions.
If you’re looking for a reputable hard money lender to acquire dependable and long-term hard money loans with easy repayment requirements, check out the private financing services by Insula Capital Group. It’s a leading private lending and real estate investment company, offering dependable loans for real estate projects, including fix and flip, new construction, land development, buy and hold, and more. Feel free to get in touch with them to request a quote and start investing today!