What Are CRE Loans?
Are you wondering about what CRE loans are? CRE loans are short for commercial real estate loans and it is the most common form of business financing. These loans are given to commercial property owners and there are many people who take advantage of it to start a new business or expand their existing one.
Why Do People Take CRE Loans?
The reason is simple because commercial property owners take CRE loans to finance the expansion of their business. Many people who want to start a new business use CRE loans to buy the land and building where their business will be situated.
What are the Benefits of Taking CRE Loans?
The main benefit of taking a CRE loan is that it will allow you to start a new business without having to worry about the business debt and credit cards. If you have taken a business card then you need to pay for a monthly fee of that card and it is one thing that you don’t have to pay for a CRE loan.
How Much Should You Borrow?
There is no limit to the amount that you can borrow from a CRE lender. There is a specific rate of interest and this varies with the lenders. It can be from 0.5% to 2.0%. It all depends on the borrower’s financial status and the lender.
Is a CRE Loan a Bad Idea?
You may have heard about the bad reputation that is attached with CRE loans and this is one of the biggest myths about CRE loans. There are a lot of people who claim that CRE loans are scams, but the reality is that you have to approach a legitimate lender and not one of the many loan sharks that are around.
The Difference between Commercial and Residential Real Estate Loans
We live in a world where everything is very fast and busy. People often do not have much time to take care of their needs and that’s why they seek loans for different purposes.
Commercial real estate (CRE) loans are basically secured loans that a business owner gets if he wishes to buy a building, and he has collateral as security. A residential real estate loan, on the other hand, is a non-collateralized loan that a person who wants to buy a property takes for various purposes.
If you are thinking of buying a commercial real estate property, then you may want to know how a commercial real estate loan works and why is it different from a residential real estate loan. Here are the top 5 differences:
Difference 1: You can borrow up to 80% of the purchase price of the property
As far as residential real estate is concerned, you can only get a maximum of 70 percent of the purchase price. Commercial real estate has a higher percentage.
Difference 2: You can choose to pay interest for a longer time
Commercial real estate loan is a short-term loan. With a commercial real estate loan, you will be asked to pay interest only for the initial period of 1-3 years. After that you will be asked to repay the entire amount.
A residential real estate loan on the other hand, has a variable rate. This means that your interest will change throughout the year. You will not have to pay the same interest rate for a long time.
Difference 3: You can pay back the loan later
If you take a residential real estate loan, you will have to pay interest monthly. If you wish to pay back the entire loan amount, you will have to pay more than the monthly payment that you are being charged.
With commercial real estate loans, you can pay back the entire loan amount at any time you want. You can also pay back the loan with a lesser amount than what you have borrowed.
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Difference 4: You need not have a good credit score
When you take a loan for a residential property, the lender will check your credit history. The lender will look at your previous credit history and will also check your present credit history. If you have a bad credit history, you will have to pay high-interest rates. On the other hand, if you are a business owner, you do not need to worry about the credit score of your business because you are a professional and your business is known to others.
With a commercial real estate loan, you do not need to worry about your credit score because the lender will not check your credit sco
Conclusion:
By now you must have understood what CRE loans are. These are the benefits of taking a CRE loan and why you should care for it. Don’t rush into taking a CRE loan just to start your business, take time to find the best loan provider and then you can start your business.
