Tag Archives: money
Hard money lenders explained
I recently attended a real estate investment seminar in Las Vegas. Between speeches by different gurus I would mingle with other investors and explain that I owned a hard money brokerage firm. Even though it has been around for almost a hundred years now, I was amazed how hard money lenders still seem to be mysterious to many investors. They either did not understand how the hard money lending industry worked or had heard that it was something they should avoid like the plague.
To put it simply, hard money loans are short term loans that are used for various real estate projects. The most common projects are house flipping, but they are also used in commercial construction and land development. Essentially, a hard money loan is often the best choice for money that is needed on a short term basis.
Unlike conventional financing, a hard money loan also known as a private loan originates from a private individual or institution unlike a bank. The loans are generally short term between 6 and 12 months and have a high, interest only payment generally between 10% and 14%
Another major difference between a hard money loan and a conventional loan is that a hard money loan is not based on a persons credit but instead on the value of the project after its completion. A good example is if John has a house that he wishes to rehab and sell for $100,000.00 a hard money lender will lend up to $65,000.00. This is what is known as Loan to Value or LTV. Most hard money lenders lend anywhere from 55% to 70% LTV depending upon what type of project the borrower has.
Now you are probably asking yourself what the catch is, how do these lenders make there money? Hard money lenders make there money 3 different ways. The first way they make there money is the closing costs. These are anywhere from 1 to 4 percentage points of the overall loan. These points are paid when the loan is completely paid off in full. The second way they make there money is the interest only monthly payments on the loan which is anywhere from 10% to 14%. The third way they make there money is if the borrower happens to default on the loan. Being as the loan is not based on the persons credit, hard money loans are secured by the property itself. If a borrower defaults, the hard money lender now has a property or piece of land for 65% of what it is worth. However, it should be stated that this rarely occurs as most hard money lenders are not in the business of foreclosing on properties.
So should a borrower use a hard money lender? The simple answer is if a borrower has a real estate project that needs short term financing that a conventional bank will not lend on, yes.
How Credit Counselors Can Damage Your FICO Credit Score! (Page 1 of 2)
Credit Counselors and Debt Consolidators are dominating the Internet, newspapers, magazines, radio, and television with ads promising to give you a miracle cure for your poor credit history and your poor FICO credit rating. This appears to be great news. Let’s see if it really is good news.
Of course there are some credit counseling agencies and debt consolidators that can actually help get people out of debt. But there are many such services run by con artists who are after your money, money you probably can’t really afford to spend. And, sadly, they have no intention of helping you.
There are trustworthy companies and shady companies among the hundreds of credit counselors and debt consolidators, and, good or bad, all appeal to your emotional distress to get out of debt. Let’s consider the differences.
The Best Credit Counselors.
These services will actually help you clean up your credit history while improving that all important FICO credit score. They will help you realize where you went wrong with your credit decisions and then devise a plan to start correcting your bad habits.
Once your spending is under control, they will help you create a budget so you can change your money management style and stay out of debt and live a more stable financial life.
The Debt Consolidation Shell Game.
These companies operate with a slightly different agenda and my advice is: You should only consolidate your debts when you have exhausted all other avenues. It’s true that debt consolidators also help you get out of debt, but they do so by making deals with your creditors to combine all of your obligations into one large loan with one monthly payment.
The pitch they make is deceiving. Yes, the payment on the consolidated loan will total less per month than the total of your current payments but, usually, the interest rate on the consolidated loan is high because you are high risk. This means you will end up paying back more in interest in the long run.
Again, avoid debt consolidation and, if you need outside help, go with a debt counseling service instead. They will monitor you and keep you from falling back into the habits that damaged your credit history in the first place. Consolidators, on the other hand, will only be concerned about you making your monthly payments on the new loan for which they collect a fee.
The ‘ Fix My Credit ‘ Crooks!
These crooks are obvious. Any ‘ fix your credit ‘ offer that claims they can magically erase your debt without you lifting a finger (except pay them) is a scam. Think about their claim. Creditors would have to forget you owe them money. Why would they do that? Some of these scams are designed to force you into bankruptcy. Sure, your debts will be gone but the record stays in your credit report for up to 10 years and your FICO credit score will plummet.
How do you find a reputable credit counseling company?