Hard Money Lenders Illinois: Compare Your Options

Are you an Illinois investor or homeowner hoping to finance your next real estate project with a hard money loan?

Whether you’re hoping to flip a ranch-style home in Oak Cliff or purchase a townhouse rental in Uptown, hard money lenders in Illinois can provide the flexibility and speed you need.

Hard money loans are a form of alternative financing compared to conventional loans. They can be particularly useful if you’re on a tight deadline, suffering from credit issues, or lack of upfront capital.

Even if you’re not a real estate investor and need to bridge the timing gap between buying and selling a home or property, we’ll share some alternatives to help you leverage your current home’s equity.

This article will guide you through the basics of hard money lending in Illinois, helping you decide if this financial tool is appropriate for your real estate investment or home-buying goals.

Editor’s note: This post is for educational purposes and is not intended to be construed as financial advice. HomeLight always encourages you to consult your own advisor.

What is a hard money lender?

A hard money lender is a private individual or company that offers short-term loans secured by real estate. Unlike traditional lenders, hard money lenders are more concerned with the property’s value over the borrower’s creditworthiness.

Clients: Typical clients include house flippers and investors purchasing rental properties who need quick, flexible funding.

Loan Amounts: Loan amounts are based on the after-repair value (ARV) — the estimated value of the property after renovations. Lenders usually lend a percentage of the ARV to ensure a secure investment.

Interest Rates and Fees: Hard money loans come with higher interest rates, typically ranging from 8% to 15%. Borrowers also face additional costs, such as origination fees, closing costs, and points.

Default Consequences: If a borrower fails to repay the loan, the lender can seize the property to recover their investment.

How does a hard money loan work?

If you’re a real estate investor seeking fast and flexible financing, hard money lenders in Illinois might be the solution. Here’s a detailed look at how hard money loans work:

Short-term loan: These loans typically have a repayment period of 6 to 24 months, unlike the long-term 30-year conventional mortgages.
Faster funding option: Hard money loans can be approved within days, in contrast to the 30 to 50 days typical for a traditional mortgage loan.
Less focus on creditworthiness: Approval relies more on the property’s value than the borrower’s credit score or income history.
More focus on property value: The loan amount is based on the loan-to-value ratio of the property being used as collateral.
Not traditional lenders: Hard money loans are provided by individual investors or private lending companies rather than traditional banks.
Loan denial option: These loans are often sought by individuals with poor credit who have been denied a mortgage but possess significant home equity.
Higher interest rates: Due to the increased risk, hard money loans come with higher interest rates compared to traditional mortgages.
Might require larger down payments: Borrowers may need to provide a larger down payment, sometimes up to 20%–30% of the property’s value.
More flexibility: Hard money lenders in Illinois can offer flexible terms with less government regulation, including adjustable credit score requirements and debt-to-income (DTI) ratios, which can help avoid foreclosure.
Potential for interest-only payments: Unlike traditional mortgages, hard money loans may include options for interest-only or deferred payments initially, providing additional flexibility for borrowers.