What questions should you ask a hard money lender? Well, when you want to borrow money, it is only vital that you think and make rational decisions. There are so many things that you need to think about right from the motive of taking a loan to make the final payment. You want to reflect on how you are going to be affected by the loan, and that is very critical. One of the most mediocre decisions individuals make is borrowing when it is not absolutely necessary. A rational person should make a decision to borrow when and only when there is financial prudence in doing that.
The lending sector has undergone a significant transformation over time. Thank technology advancements, you can apply for a loan, get approved, and receive the funds in the next business day, if not the same day. This is especially the case when it comes to online loans. However, caution needs to be taken. Even though you may borrow money online, the risks associated with such a move are quite high. The increase in the demand for credit has led to the rise in the number of unscrupulous business people and scammers, that is why it’s worth to check out Loan Advisor online review to know if they are legit loan companies. In the process of borrowing funds, many have lost their little hard-earned money. That is why it is vital to always evaluate money lenders before making a decision to deal with them.
Evaluating Hard Money Lenders
Hard money refers to a concise term loan that is secured using a real estate property. The loans in this category are financed primarily by private investors, unlike the case in traditional lenders like banks and credit unions. In many cases, the loans have a term of only 12 months, though it is possible for it to be extended. Some hard money loans last for up to five years.
We stated at the outset that there are so many risks involved when borrowing money. Well, the risks traverse nearly all areas of borrowing. It doesn’t matter the type of loan; you are only supposed to be critical when dealing with lenders.
So how can you effectively evaluate hard money lenders? Well, here are some of the vital questions you need to ask.
What is your level of experience?
At all times, it essential to ensure that you are dealing with experienced lenders. A hard money loan is very critical, and thus you need to be even more careful. You are likely to have an outstanding experience when dealing with an experienced lender. So, make sure the lender has enough experience and a good reputation. More importantly, you should also remember that there are different types of hard money loans. A lender may be experienced in a specific loan only. Again, ensure that the lender has firmly established himself within the particular loan you want. In general, hard money lenders are always joyous to see their clients succeed. One way a borrower may turn out to be successful is through leveraging the vast experience of the hard money lender to evade any possible pitfalls.
Do you have a license ID?
At all times, you should aim at working only and only with licensed lenders. Hard money lenders are supposed to be licensed. They are required to display their license ID on their website as well as in any of the things they produce. In case you cannot see the ID, just ask about it. With the ID, you can do a search on the website where you can get further information relating to the licensee.
In case there are any disciplinary issues against the lender, you can also know. In Singapore, hard money lenders are supposed to be licensed. In case a lender is not licensed, the business is risky, and you may lack redress in case you suffer risks.
Are you the real lender, or you are going to subcontract the loan from another lender?
A direct lender will actually process the whole loan and use the internal resources to fund it. In contrast, a broker will obtain funds from external sources. In case you are dealing with a direct lender, you are likely to receive the funds faster. Also, the terms are likely to be better when you are directly dealing with a lender.
It is not wrong to deal with brokers. A direct lender may be aware of a particular financing source that might be quite cheaper, while a broker might be aware of a certain lender specializing in specific requests that may not be found elsewhere. Therefore, either of the options can work for you. Nevertheless, you must be aware of the lender you are dealing with right from the beginning.
Can I see your previous borrower?
A genuine lender will be willing to link you to previous clients even without asking them to do that. Try to get reviews and work experience from past customers before signing the deal with the lender. But remember, the reviews you may come across online may still not be authentic. In case a lender lacks reviews or any positive thing from third parties, this is likely to be a red flag to pay attention to.
At what rate and points do you lend?
The rates of interest and points determine the total cost of a hard money loan. You need to talk to several lenders to have an approximate value of the current rates. Even though the primary concern is often on the cost, you also need to focus on the dependability and experience.
Do you charge other fees?
It is always important to set matters straight right from the outset. You should ask whether there are other fees, such as origination and documentation, that you will be required to pay. Inquire about all the fees in advance and be sure to include them in the computation of the total loan costs.
Do you charge the Prepayment penalty?
There are cases when lenders charge penalties for prepayments. In many instances, these penalties do not have significant effects on the borrowers. Just make sure the penalties apply only within the stipulated time.
The Bottom Line
There are so many questions that you can ask a hard money lender. In this blog, we have to review eight critical questions you need to consider for evaluation. But how can you make effective use and repay a hard money loan? Find the answer to this question in our next blog. Thank you?