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What Is A Hard Money Loan?
A hard money loan is an often used term but most
people are not 100% sure about what this term really means. With the
many different definitions floating around it is hard to know which one
is right.
A hard money loan is different from a bank loan because the person
taking this loan usually does not have any collateral and is a high risk
customer. This is why they are not eligible for a bank loan and are
forced to find a hard money loan. The money is usually loaned from a
private business or investor. This loan is given based on their property
value, as this is given as their one and only collateral, taking into
account the borrower’s inability or willingness to pay back this loan. A
hard money loan normally has an extremely high interest rate but lower
Loan to Value Ratios.
Hard money loans are almost always a last resort for the borrower.
Finding a hard money lender is not an easy task unless you are
desperately searching for one like most of their customers are. Their
customers have already been turned down by the bank because of bad
credit or other financial problems, now their only chance is to select
this method of funding.
It is important to be clear that hard money lenders are not like loan
sharks or other black market lending. This is a legitimate way to
retrieve a loan if you are in dire need. They do look at their clients
and their property to ensure that in the event that the customer cannot
pay the loan, their homes and property possess enough value that the
lenders can make a profit when they foreclose it.
People and businesses who buy expensive properties and who already own
such homes and want to cash out large amounts of their equity via
refinance loans also turn to private money. Real estate investors also
use these forms of financing to avoid the terms and conditions of any
bank loan. These buyers purchase properties for almost nothing, fix them
up and sell them for profit. They use private loans because the loans
come with less red tape and restrictions than bank loans.
Hard money loans have many different types of borrowers and lenders. It
is a growing industry. |