Archive | February 2016

Los Angeles Hard Money Lenders: More Appealing Now Than Ever

download (79)News shows that Los Angeles is going through a crippling housing situation. Demand for houses is growing. Los Angeles Realty News shows that the problem is that prices are spinning out of control making houses beyond the reach of those who most need them. The crisis has approached heights such that some activists are discussing seeking government intervention.

At one time, decades ago, people would approach banks for loans and the banks were more forthcoming. In fact they were too forthcoming which is why we had the Depression. Banks learned from that and subsequently only proffered loans once they closely reviewed credit history and worthiness. Today, banks and conventional lending institutions have put a harrowing folio of practices in motion which is why it takes so long to emerge with a mortgage (at least 60 days) and which is why so many potential borrowers are refused.

Those Who are refused seek alternatives

Hard money lenders

One of the most popular alternatives has been hard money – otherwise known as personal/direct/or bridge – lenders. Los Angeles has them too. If you look at the directories of PrivateLenderLinks or BiggerPockets,for instance, you will see 100-200 listings on each. Investors have few choices. There are the conventional loans and then there are the unconventional, but even these may be difficult and costly to land. One of the most appealing lenders in the unconventional loan category is the direct money loan lender who funds from his or her own pocket and considers the value of the collateral rather than the reputation of the borrower. Many find direct money lenders enchanting. They ask for little documentation and supply the loan in short order. Think of 2-3 days turnover!

On the other hand, all of this comes at a catch.

Disadvantages.

Hard money lenders intimidate potential investors in two ways:

1. Huge payments – Lenders fund from own pockets. They take a risk. To offset that risk, personal money lenders tend to ask for double the interest rate of the traditional mortgage loan. They also ask for a hefty prepayment. Few borrowers are able to oblige and when they fail, their property falls into the lender’s lap.

2. Low loan to value ratio – Properties have their equivalent in money.So, for instance,if your property is worth $80000 you would get $1000. Hard money lenders are notorious for paying glaringly low percentages that tend to hover around 50-60% of the collateral value. This also dissuaded borrowers.

Events have changed.

A few days ago, AlternativeLendingMagazine.com,the largest source for direct money loans and direct money lender programs in California, announced that hard money lenders in Los Angeles have expanded their LTVs from the usual 65% to 75% of the appraised value to more attractive rates. A cursory look at the latest reports from online LA lending agencies show that one or two individuals or organizations even offer LTVs at 100% of the appraised value.This is terrific news.

Alternative Lending Magazine compiled its research through the use of accurate, real-time, internet-based data collected from housing funding sales trends and lender behaviors such as recorded deeds and final closing statements. It analyzed more than 262 direct lenders. The website concluded that,given the situation in California in general and in Los Angeles in particular, these proceedings point to an optimistic future for hard money lenders in Los Angeles.

In short…

The high rate of interest remains one intimidating factors. But you can whittle down these rates with research, shopping around, and negotiation. Los Angeles needs its unconventional lenders. The market is rocketing and most investors need loans to profit. For those who are unable to land loans from traditional sources, direct money lenders are one interesting solution. Recent reports show that their mainstream popularity grows as rates push down and LTV floats up. In fact, hard money loans seems to be the best option of the future.

Yanni Raz is a hard money lender and trust deed investing specialist from Los Angeles California. Yanni write related blogs to educate potential real estate investors. “Before investing your money in any deal, read my articles.”

The Pluses and Minuses of Hard Money Loans

download (78)Hard money loans are an alternative form of getting money that many people are unaware of. When you need a loan in a hurry and are shunned by your bank or credit union because of your low credit or for other reasons, hard money lenders may lend you the required sum for as long as 10 years (or longer depending on circumstances). They look at your assets not your credit; therefore hard money lenders may be an alternative to consider. Here are some pluses and minuses of hard money loans

Pluses of Hard Money Loans

1. Rapid Process – Banks take 60 days at least to consummate the process. The typical hard money lender will hand you the loan within 1-2 days. Local lenders who know you may even give you the funds that same day. This works out particularly well for you if you need the money for some fast purchases, for emergency need, or for other situations such as when you want to move on with construction in order to sell your property. It also helps you impress the buyer when you want to jump in front of a bidding queue to land a certain property.

2. Less paperwork – Banks and traditional lending institutions tend to haul you through a grueling underwriting process that involves signing lengthy and complex forms and then waiting at least a month to see if you’ve been approved. Hard money lenders waive that. Each has his, or her, own system, and each deals with borrowers individually. Borrowers, therefore, tend to sign only a few forms. Lenders will ask you a few questions, and may look into your credit history. The Dodd-Frank Act of 2010 states that lenders have to make sure that borrowers can pay; that they are not charged humongous rates of interest; and that they are charged no more than two pre-payments (depending on circumstances). Lenders evaluate each application differently and make their conclusions based on your property value rather than on your credit. So even if you have bad credit, you may be able to get your hands on a hard money loan. The lender focuses more on the value of your property than on your credit.

3. Flexible Terms – Banks may demand regular payments. The lender goes soft with you and often provides you with flexible loan repayment terms. (Again, this depends on the specific lender). So, if times are tough you can get by with only paying interest each month or with only paying the balloon repayment at the end. This makes it easier for you in the long run instead of causing you to make a hefty payment each month.

Minuses of Hard Money Loans

1. High Interest – Hard money lenders charge triple the amount of banks – and sometimes even more than that. Lenders can sometimes be capricious in their interest amounts, so it is important to shop around. Some lenders may offer comparatively reasonable rates, but we suggest that you negotiate since lenders know that they are your last resource and they may charge accordingly. Some of the states’ usury laws, such as those of Tennessee and New Jersey, prohibit hard money lenders from invoking excessive interest. Residential borrowers have recourse to further protection under Consumer regulations and the Dodd-Frank Act. If you’re a commercial borrower, you need to be more wary since loan terms are more aggressive and you receive less protection.

2. Low loan-to-value ratios – The loan-to-value ratio is how lenders determine how much money you’re going to get. For example, with a loan-to-value ratio of 70%, the lender will give you $70,000 for a $100,000 piece of property. Lenders usually give only 60% or 50% of your required amount which means that you’ll have to dig up the rest from somewhere else.

3. Hard to locate – An honest and efficient lender may be hard to locate. You can find hordes of money lenders online but each lends only to one or several states and are certified to lend to the states that they deal with. You may have few or none of the lenders that you prefer (or that will service your type of loan) in your region and you may have to travel to get the services that you want. In all cases, make sure that the lender carries licensing from the National Mortgage Licensing System (NMLS) and through her regulatory state agency.

In short…

Hard money loans may be wonderful for you when you need them in a crunch and can’t get the money from anywhere else. They have relaxed approval standards, are fast to get, and involve meager paperwork. On the other hand, they have a low loan-to-value ratio and a high interest rate. If you have good credit, you may be better off with the traditional loan. Consider hard money only if you have a short term pressing need with few or no alternatives.

Yanni Raz is a hard money lender and trust deed investing specialist from Los Angeles California. Yanni write related blogs to educate potential real estate investors. “Before investing your money in any deal, read my articles”

An Introduction to Personal Loans in Singapore

images (47)Singapore is one of the top financial centres in the world and the banks in the island nation offer a wide range of banking products, solutions and services including personal loans. These loans are designed to help the people of Singapore in meeting their financial needs. The interest rates offered can be quite attractive and the customers also enjoy flexible repayment tenures to pay off the borrowed amount. It is not just the banks and financial institutions in Singapore that offer personal loans in Singapore. In fact, there are many licensed and unlicensed moneylenders that offer personal loans in the country.

Types of Personal Loans

There are different types of personal loan products that are available in the ‘Lion City’ and they are as follows:

1. Term loans – these are traditional loan products that offer the customers with the money they need and also require them to pay back the money with the applicable interest within the term specified in the contract they sign. They are mainly offered by the banks and traditional financial institutions in the country.

2. Loans against Credit Card – many of the credit card issuers in Singapore offer their customers with instant cash against the available credit on their card. The loan applications are approved within no time and the money is transferred directly to the bank account of the applicant. In most cases, the customers can avail up to 100 percent of the available credit of their card as a loan.

3. Personal line of credit – some of the popular banks operating in the country, such as Maybank, do not offer personal loans and instead they offer a personal line of credit that provides people with access to funds on a monthly basis. It is a type of revolving credit that requires the customers to make monthly payments for accessing more funds.

4. Overdraft protection – OCBC Bank and other top banks in Singapore offer overdraft protection facility with their savings account with the help of which they can withdraw more money than that is available in their account. The additional money that is withdrawn is regarded as a loan and the customers are expected to pay it back through equated monthly instalments (EMIs).

Banks Offering Personal Loans in Singapore

Some of the top banks that offer personal loans in Singapore are as follows:

  • OCBC Bank;
  • UOB;
  • DBS Bank;
  • HSBC Singapore;
  • ANZ Singapore;
  • Citibank etc.

The Application Process

If you are an adult with a steady income and a good credit score, you can approach any of the banks in the country and apply for a persona loan. You can either visit any of their branches or contact their customer support team. Some of them will also offer you with the option of applying for the loan online on their website.

Loan Amount

The amount offered will depend on your annual income, credit history and overall profile as a borrower. You can expect to borrow a higher amount if you have a high annual income along with a lucrative credit score. Similarly, the interest rates offered to you will also depend on the factors mentioned above and you can avail a better rate if you are one of the loyal customers of the bank i.e. if you have already opted for other products offered by the bank.

How Do You Obtain An Unorthodox Loan

download (77)An unorthodox loan is defined as a loan that is not obtained through the common lenders or through the common channels. It may be a situation where your income is variable, your purpose for the loan is not conventional, you own a business or a loan is for investment purposes. Since the typical proof of income, tax return, employer reference or account statement likely will not apply to you, there is information that you can use to expand your options for getting a loan.

Who Is the Lender?

The first variable to consider is: Who is the lender? The underlying questions here are: What types of risk are they willing to take and how flexible are they in applying a solution for these risks? The typical lender of choice for people is a bank. Banks are known for being conservative and conventional in their lending practices. Therefore if you have risks that are not standard, you will likely not get the best deal on your loan, or the loan may come at a high cost. The banks should not be ruled out because there are cases where exceptions are made depending on how the loan is approached. Other lenders that are available to you as a borrower are private lenders, smaller institutions or mortgage brokers. Private lenders are lending their own money and may cater to real estate deals or business deals. Smaller institutions like credit unions or smaller banks may not as stringent as the major banks. Mortgage brokers are people that can shop around and find the best deal from among many different lenders, both traditional and non-traditional. If one type of lender is not providing you with a satisfactory loan, try another type of lender.

What Are the Lenders’ Concerns?

Depending on what the money is borrowed for, there are different options available.

The underlying themes in getting a loan for the lender is: Can I trust you the borrower to pay the loan back on time? Is the thing you are borrowing money for valuable over time? What risks are there that the current circumstances will change, putting me at risk? Will I make enough money to make this loan worthwhile? If you can prove that you are able to pay the loan back and the risks are under control, you can obtain a loan a high percentage of the time.

What Is the Money Being Borrowed For?

If you are seeking a loan for an asset that generates income or is likely to appreciate in value, the risks concerning the loan can be confined to looking at only the asset. As an example, if you are seeking a loan for a rental property, and there is a history of consistent income over a long period time, this loan would be considered lower risk. Whether the borrower has any other income may not be relevant. The borrowers’ assets and financial history may also not be important. A similar example can be a business with a proven track record of income. If statements from an unbiased third party can show how much the business earns, the history of the borrower may be disregarded in this situation. If the real estate considered is a piece of land that has a long horizon before it is developed or a new business without a track record, the lender may resort to asking for something else as collateral or trusting that the borrower himself is creditworthy.

Does the Borrower Have Other Ways of Paying the Loan?

The borrower may want to borrow money to buy a piece of land that has no income, but there are 5 other rental properties that are paid in full and are earning income that far exceeds the value of the loan. The risk of this venture is low provided that the lender has access to these rental properties as collateral. If they do not and the land is being appraised as a stand-alone situation, the lender may refuse the loan or charge a much higher interest rate. Other means to pay back a loan are a business that is generating a lot of cash flow or guaranteed investment income from another source.

What Is the Possibility That Market Conditions May Change?

This is a risk that can affect conventional and unorthodox loans alike. The risks are different depending on the situation. If the risk of non-payment is coming from an economic recession and widespread layoffs, the conventional loan may get riskier if people lose their jobs and cannot pay the loans back. A real estate correction may mean that the value of residential homes may plummet, making the collateral worth less than the loan, creating a loss on foreclosure. For an unorthodox loan, the risks may be more specific. If the loan is for a small auto parts manufacturer and there is a massive recall on their key client, the revenues of this business may decline significantly whereas other auto parts businesses are not affected. Real estate in a certain area may dive due to crashing oil prices and not dive in an area dominated by senior’s residences. A natural disaster in one part of the country may devastate the local economy in that area but not in the surrounding areas. The lender has to assess these risks before the loan is made and depending on what the conditions are at the time, some loans would be perceived to be riskier than others.

Who Else Are You borrowing Money From?

Lenders want to know that they are the first person who will get paid. If you are not the first person, there is a priority sequence where you would be second, third etc. This would mean that the first person gets access to the collateral first in a foreclosure. They would also get first access to any residual payments if there are not made on time. If you are borrowing from more than one lender, the lenders following the first lender may be taking higher risks and the cost of these loans will be more expensive.

Obtaining an unorthodox loan is more complex than a conventional loan, and more work would have to be done to secure this loan. There are however more options available depending on what the situation is, and these would have to be explored in detail and kept in mind as the needs change for both the borrower and the lender.

Do you want to:
Learn how the world of money really works without the need of a time consuming or expensive course of study?
Discuss what you want to achieve according to your horizon?
Restructure your finances to achieve your goals?
Advice that is not affiliated with any institution or any product – an independent opinion?