Hard money loans can be a great alternative to a traditional bank loan when financing a real estate transaction. These loans offer the ability to receive the needed cash quickly, usually with minimal hassle and more flexible terms, as the terms are negotiated with an individual or private company. While there are some evident drawbacks to hard money loans like high interest rates, there is another inherent risk in borrowing cash in this way, the possibility of working with an inadequate lender. The following article examines some of the potential risks when borrowing from hard money lenders.  

Arduous Application Process for Hard Money Loans

The process of obtaining a hard money loan is supposed to be more straightforward than a traditional bank loan, but some lenders complicate the process with unnecessary requirements like proof of real estate experience or looking into the borrower’s finances and credit history. The application process should only take a few days, with funds disbursed after about a week, so watch out for hard money lenders with longer application and funding timelines.

Hard Money Loans and Hidden Fees

While all hard money lenders charge interest on the loan, some may try to take advantage of borrowers by charging additional or even hidden fees that are not explicitly disclosed. Examples of fees to inquire about and look out for are underwriting fees, legal fees, document preparation fees and/or an upfront fee prior to loan closing.

Lenders Having Insufficient Funding Ability

As hard money lenders are individuals and private companies, they certainly lack the extensive resources of established banks and therefore are more limited in their funding ability. While some hard money lenders are well established and maintain adequate amounts of cash for the vast majority of a borrower’s funding needs, other hard money lenders operate on a small scale and may not have sufficient funds to support the borrower.

Loan originators Lacking Experience

Newer hard money lenders may lack the comprehensive experience and expertise to sufficiently satisfy the needs of the borrower. It is best to utilize a lender with extensive industry experience as they will understand borrowers and be able to provide the most appropriate services.

The Difference at EMCAP Lending

At EMCAP Lending, we make obtaining your hard money loan a swift and easy process. Unlike other lenders who may require extended documentation and application processing times, at EMCAP it only takes a few minutes to complete your application, whereby a decision will be provided to the applicant within 48 hours. Furthermore, often the only documentation required is the stated asset used for collateral and the stated income for the property being borrowed against.

EMCAP lending fees are fully transparent and easy to remember as the only payment we receive on the loan itself is the monthly interest with payments due every 30 days, and an origination fee used to pay for the processing cost of the loan.

Worried about the lender’s ability to meet your funding needs? At EMCAP, we can service the vast majority of investors’ funding needs with loans ranging from $150,000 up to $5,000,000. With over $200 million of loans made, we have the proven ability and willingness to service investors seeking funding of various amounts.

Along with extensive funding ability, experience is a factor that separates EMCAP from other lending services. With over 30 years of experience in real estate development and lending services, EMCAP Lending principles provide the expertise and understanding essential in providing comprehensive and efficient lending to our borrowers.

Are you looking to finance a real estate investment? Contact us today for more information about our lending services or prequalify in just a few minutes. We look forward to serving your lending needs to enable wealth creation through real estate investment. 

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