Common Myths About Hard Money Loans

hard money loans in Houston

If you’re considering using hard money loans in Houston, you may have heard some pretty negative things. Unfortunately, a small minority of  lenders give the industry a bad reputation. This can make people think that hard money loans in Houston are undesirable and only use them as a last resort. Listening to misinformation about collateral loans in Houston may cause you to miss out on opportunities. Hard money can actually be a great way to help finance your real estate investment. There are some common myths about private money lenders, but it’s important to distinguish fact from fiction.

Myth: Lenders Don’t Act Like Banks Do

A common misconception about hard money lending in Houston is that lenders don’t consider the same things that banks do. While many people can get a loan through a private lender even if a banking institution has denied them, lenders still act the same way banks do regarding money. Both hard money lenders and banks have guidelines for who they provide financing to. Additionally, both of these types of lenders weigh the pros and cons for every loan they consider.

The difference in approval between traditional loans and hard money loans in Houston is that private lenders focus less on bad credit and more on the value of the property. Since hard money loans are collateral based, people with bad credit can still qualify.

Myth: People Finance 100% of Their Projects with Hard Money Loans in Houston

Another myth many people believe about collateral loans in Houston is that they are typically used to fund an entire project. This isn’t necessarily the case. Most people use these loans to fund short-term projects. Additionally, collateral loans are often used to provide additional capital above and beyond a traditional loan. Hard money loans generally have a shorter closing time and shorter terms. This means they are better suited for projects like renovations, or to purchase undeveloped property you plan to build on.

Myth: People Can’t Profit If They Use Collateral Loans in Houston

One of the worst myths out there is that hard money loans in Houston decrease your likelihood to make a profit on your investment. This simply isn’t the case. Many believe that because hard money loans have shorter terms and higher interest rates, that they can negatively impact profitability. However, this financing option can actually help you turn a profit more quickly. Because hard money loans tend to be approved quickly, you can take the initial steps toward earning revenue as soon as possible. Less wasted time waiting for closing means you can profit sooner rather than later. So long as the cost of the property, construction, repairs, and financing work together toward profits, a hard money loan can help you make money. 

Myth: Banks Know Better Than Hard Money Lenders

Another common misbelief about hard money loans in Houston is that banks know more than private lenders. However, most hard money lenders work specifically with real estate investors. Therefore, they likely have more industry knowledge than a bank. They can provide customized solutions in a way that banks may not be able to. Therefore, you should work with a lender who has specialized experience in real estate investment for the best outcomes.

Texas Funding has been providing hard money loans since 1982, so we have the knowledge and expertise necessary to serve your loan needs. Our financial strength and deep understanding of the real estate investment industry gives us an advantage to help you find the best, most practical financing solutions for you. Call us today at (713) 932-6600 to discuss your needs with our professionals. We are here to serve you.