Interest rates are a very important factor when you are looking to take out a loan. Any loan from the bank will have low to medium interest rates, but a loan from a hard money lender will have extremely high interests rates that make most people cringe at the thought. These are the interest rates that cause hard money lending to be a last resort for almost all of their customers.
Interest rates may vary depending if you are dealing with a commercial or a private hard money lender. Almost all of the commercial hard money lenders charge an extraordinary interest rate of 12-18%. This is doubled the amount of any bank interest rate that you will find even if you are approved. These are rates that no one wants to see associated with their loans!
If you are dealing with a private hard money lender you may find that they are charging an even higher interest rate. The downfall of a hard money loan is that the person applying has no other options and the lender knows this. Therefore, they may decide to be greedy and charge an even higher interest rate than the commercial hard money lenders and the borrower can not turn it down as they have no other options left.
What is unfortunate about hard money loans is that over half of the customers are unable to pay their loans back no matter how hard they try because of the extreme high interest rates. The other half get lucky and make ends meet or they are already wealthy and using these bank free loans to increase their growing income. It is the unbelievable interest rates that take down these customers. The lenders take advantage of their desperateness and charge extreme amounts to increase their gross profit. In the end most customers have their homes foreclosed and they are forced to start over.
Hard money loans can be described as nothing other than a last resort for most and the interest rates keep going up and up with each passing year. If this is an option that you are considering, take the time necessary to find the right company to work with. In addition, really work at finding the best option for you in terms of interest. Like any loan, you need the funds at the most affordable price possible. That is not something that is easy to do if you do not do a bit of research. Hard money loans are often offered at various rates from various companies.