The Drawbacks of Arizona Hard Money Loans

Nothing in the world is perfect and Arizona Hard Money Loans are no exception. But even after knowing the drawbacks, many borrowers are happy to take advantage of hard money.

Arizona Hard Money Loans are short term loans that are offered to borrowers by private lenders. These loans are often called asset-based loans or non-traditional loans. These loans are fulfilled based more on the value of the property that is being used as collateral than they are based on the creditworthiness of the borrower who is requesting the loan. And while there are many benefits to Arizona Hard Money Loans, it is important that all potential borrowers understand what the drawbacks of hard money can be.

Arizona Hard Money Loans are very popular with borrowers who have credit challenges. Knowing this, it is understandable to see why Arizona Hard Money Lenders believe that these borrowers represent a higher risk than other borrowers with good credit. And while Arizona Hard Money Lenders are willing to offer these credit-challenged borrower’s loans, they are going to demand a higher interest rate to offset the risk. Hard money loan interest rates are currently estimated at between 7% and 10%, but for a very credit challenged borrower the rate could be even higher.

Another aspect of hard money that can present a challenge for some borrowers is that the loan is only offered for a rather short term. One to three years is the typical length of a hard money loan, while some can extend to as long as 5 years. For borrowers who need more time to repay their loan, it is common to refinance another hard money loan or to move to a much longer-term traditional loan. The term length of each loan will be clearly defined in the loan documents, and it is important that borrowers be aware of the timeframe that they are agreeing to before signing the loan documents.

Finding a Lender

Another drawback to hard money can be locating a reputable lender. It is not as easy to find a hard money lender as it is to walk down the street and locate a bank. But there are many online resources that can provide references and a list of Arizona Hard Money Lenders in your area. It can also be helpful to speak to other real estate investors to learn about the lenders that they have experience working with and how easy they have been to work with.

Make Your Own Evaluation

Nothing is all good, all bad or perfect for everyone. Hard money has its benefits and drawbacks which need to be understood prior to accepting any loan. Every borrower needs to evaluate his or her options and compare the terms and total cost of all of the loan options available. From that point, you can select the loan that offers that best blend to meet your financial needs and other requirements for repayment terms and benefits. Making a well-informed choice is the best way to know that you are going to have every opportunity to be successful in your real estate investing career.


Dennis Dahlber Broker Ri CEO Level 4 Funding LLC
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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