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Lo-an behold, should I be borrowing?
I remember getting my first loan. It was to pay for a then little-known experimental procedure called moustacheplasty. My friends warned me not to, but I just knew that Id love the way the wind would feel through the bristles (which, as an impulsive young lady of 19 years was quite a thrill I can tell you!). I managed to get a good deal on my loan, and had it repaid in no time. It ended up as a good investment really; I now get so much work from circuses and village fetes that the operation has paid for itself many times over.
But I was lucky, with the moustache but more so with the loan. I did it all wrong but somehow managed to land on my feet. However, if you dont want to leave selecting a loan to the vagaries of chance read on for some helpful hints
Do you need a loan?
It sounds like a simple thing to say but do you actually need a loan? Maybe a credit card might be more appropriate if you can get an interest-free deal and can be disciplined enough to repay what you borrowed in a short space of time. So-called payday loans (a specialist type of loan where the money you borrow normally has to be repaid within a month) charge a fantastical amount of interest and should only be considered as a very last resort once you have exhausted all other avenues.
Committing yourself to any borrowing requires careful thought. Is this something you can save for? Is it necessary to make the purchase right now? (In my case I had the impatience of youth and just wanted my own moustache as soon as I could get it glued onto my face.) Once you have questioned your motives and have decided that you are still looking to get a loan, check out these key points:
- The very first thing you should do is itemise your income (wages, moustache-related royalties etc.) and your outgoings (mortgage, council tax, utilities, subscription to The International Mustachio Gazette). Itemise everything and be realistic if you think you only spend £250 on groceries each month, but your previous bank statements show you spend £350, use £350! Once you have itemised all your outgoings and worked out how much you have left, then you will have a better idea how much you can afford on a monthly basis.
- When taking out any loan, be it an unsecured loan, secured loan, mortgage or moustache finance, it is always best to set the term for as short a time as your budget allows. This will mean that your monthly repayments are higher, but over the term of the loan you will actually pay less as you are not getting charged as much interest.
- Secured vs. Unsecured. You might be forgiven for thinking that the difference between a secured and an unsecured loan is that a secured loan gives you more security. Not so. A secured loan will be attached (secured) to a piece of property, normally your house or car, less commonly your moustache. If you fail to keep up with your repayments the lender can sell your property to get their money back. Secured loans tend to be available for larger amounts, over longer terms. If you are considering a secured loan speak to your mortgage lender as well, they may be able to off you a further advance which might cost a lot less!
- When you are looking for a loan, be aware that the typical advertised APR rate isnt necessarily the rate that you will actually get. It is usually the case that the rate you pay is linked to your credit score, as well as to the amount you wish to borrow.
- Dont settle for the quote your bank gives you. When I was considering moustacheplasty I looked at several surgeons, and then chose the one that had the best moustache. It is similar with loans; rates vary considerably so dont be lazy and settle for it, do some leg work to make sure you get the best deal.
- When you take out a loan a lot of lenders will allow you to defer your first payment for a couple of months. Some of them will sneakily include the deferred payment on a quote watch out for this as its a way lenders can squeeze more money out of you. When deferring the first payment on a loan, interest continues to be charged, increasing the overall amount you end up paying back. Think about whether you actually need to do this to alleviate the immediate pressure on your finances (you might want to pay for Christmas for instance or your annual car insurance premium or an excursion to the 2010 Moustache of the Year tournament in Bratislava). If you can afford the payment it is best to pay sooner, not having to pay for a couple of months might feel good, but you are only postponing the inevitable!
- Early Repayment. Many lenders will charge you if you repay your loan before the end of the agreed term. If you think you might be able to repay early, you should be ready for this charge. Even better though, when selecting your loan, why not find one that doesnt have an early repayment charge at all!
- Fees. There may be a fee payable for setting up the loan so, as ever, check the terms before you sign up some lenders will “helpfully” offer to add this to your loan (theyre all heart arent they? But remember any fees added will be charged interest as well which will increase the overall cost). You might be offered a same day transfer of the loan into your bank account there might be a charge for this.
- Payment Protection Insurance (PPI). This type of cover has had a lot of bad press over the last few months. Basically PPI will ensure the monthly repayments are met on your loan if you are unable to make them due to sickness, an accident or unemployment. The two key things to remember are: dont settle for the quote your lender gives you (shop around or see a broker) and think carefully about whether the cover is actually necessary. Payment Protection Insurance may be worthwhile, particularly if things are tight or you are reliant on a single income. In these situations, it may be more appropriate to try to cover all of your outgoings: mortgage, utilities, insurance premiums etc. with a larger policy, normally called Accident, Sickness and Unemployment cover.
- Lastly, it is always a good idea to check your credit rating before you make an application. Remember that any declined loan applications go onto your credit file as well, so dont blindly go to every lender making an application it will become less likely that you will get a loan. If you have a poor credit history in this time of tightening criteria, you would be better to seek professional guidance on your options. Remember you can also always get online and compare the best loans available to you before speaking to anyone.
Well, these tips should have given you all you need to go forth and prosper. As for me, well, I am currently in rehearsals for my bid to become the first female Freddie Mercury tribute act in Nepal. Coming to a theatre near Kathmandu soon
Hard Money Loans
Commercial Hard Money Loans
Commercial Hard Money Loans are real estate loans based primarily on the collateral. Real estate collateral is the protective equity in the real estate transaction, and is the primary factor in qualifying for a Hard Money Loan. These types of loans are typically provided by Private Lenders who are looking for sound transactions based on equity and not on credit scores.
Hard Money Loans are an option when a real estate transaction falls outside the parameters of conventional lending standards of banks, life insurance companies, and other sources of traditional loans. Conventional loans are based on the borrowers credit and income, but credit and income are not primary factors with hard money loans. Banks have government regulations to contend with, where as regulatory red tape can be bypassed with Hard Money loans due to their origination being with Private Lenders.
Private Lenders, or Hard Money Loans, are a source of funding for:
* Property acquisition with little or no cash from the borrower.
* Short term cash for development, or to rehabilitate property.
* Investment capital instead of a business partner.
* Transactions that need to close quickly.
* Transactions that dont qualify for conventional financing.
* Borrowers who dont have the normal income documentation banks require.
* When other properties, or assets can be provided in tailoring a loan.
* For sound transactions that make sense to use this approach.
Being a Private Lender and not a bank allows the Lender to make quick decisions. It also allows the Lender to provide more flexibility in structuring the deal. There can be many advantages when working with a Lender that can tailor the transaction and make quick decisions.
** Benefits of using Hard Money Loans **
1. Easy Application Process – Private Lenders base their decisions on the current quick-sale market value, the purchase price, and condition of the property being offered as collateral.
2. Uniqueness of the collateral – special use properties and personal property, which are not acceptable to a bank, may be considered by the Private Lender.
3. Flexibility – Private Lenders have the ability to tailor the loan to meet the needs of the
4. transaction.
5. Seasoning – a property without a track record of payments can still qualify.
6. Quick Closings – since the propertys equity is the primary factor, less information on the borrower is required.
7. No Pre-payment penalties – Hard Money Loans are typically used for short-term situations.
8. Therefore, in many cases early payment of the loan does not penalize the borrower.
9. Pre-qualification – allows borrower to be a cash buyer.
Although understanding the benefits, what most borrowers consider the downside of Hard Money Loans is the interest rate.
Yes, the rates are higher than conventional financing, and if that was the only consideration then Hard Money Loans might not look like a viable means of financing. However, when a borrower is analyzing the entire transaction and not just the expenses, the borrower may well find the profits far out ways the short term costs. To illustrate this, in a recent transaction a borrower paid what he considered an exorbitant short-term interest rate, but after he netted $3 million in 30 days in flipping a commercial property, the rate was really inconsequential.
It is the quick and flexible access to capital that makes the borrower money. When considering rates, consider that “time is money.” What are the benefits of a quick acquisition? Does the Hard Money Loan allow the borrower to make money on real estate that would otherwise need to be bypassed?
Many transactions seeking financing, dont meet the requirements of a bank loan, dont have adequate borrower credit, income or documentation, or involve commercial property that is in some stage of need of repair. These factors increase the risk of the transaction and eliminate the conventional lender as a source of funding. Private Lenders will accept the risk and this is reflected in the interest rate. As in all things financial – the higher the risk, the higher the rate of return.
Instead of forfeiting a deal, work with a Lender that has the ability to offer alternatives and meet critical time lines. For many commercial borrowers Hard Money Loans have become an alternative source of funding they rely on to generate profits.
** Tips **
* Work with Lenders who are themselves Investors instead of bankers. The will have a better understanding of what you need and what you will be faced with.
* Consider the Lenders involvement as a positive. The more feedback they can provide, the more dedicated they are to your project, the better chances of your success.
* Although other real estate and personal assets can be provided for additional collateral, so you dont lose everything in the event of a default, consider properties that have the equity to support the transaction by themselves.
* Ask that the Lenders process be explained in detail – step by step.
* Understand the different fees and amounts charged by a Hard Money Lender.
* Use Hard Money Loans when you need: quick closings, have an opportunistic acquisition, rehabbing distressed property, sale/leasebacks, bridge financing, construction, short term financing, transactions that dont meet normal bank standards, and avoiding foreclosure.
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Funding Projects
For assistance in funding a project please review information from The Project Corporation, a professional consulting firm with expertise in business funding.
For more information on obtaining funds from the capital marketplace please visit Business Loans and Venture Capital