The concept of lending money to someone as a financial help is an age-old concept, but these days these things have become more institutionalised and more complex. Loans are available for various purposes which include home loans, car loans, boat loans, business loans, education loans, personal loans, etc. These are offered by several companies in this lending business. These loans may or may not be available against the collateral and this depends on several other factors.
These loans may or may not be available against the collateral and this depends on several other factors.
Hard Money Loans
Hard money loan is a type of asset based financing through which a borrower receives funds which are secured by the property. These loans are generally issued by private companies or investors. There is a huge demand for this type of loan in the market and these could be used for various purposes. Hard money loans are quite similar to a bridge loan and have almost similar lending criteria.
How is it Different from Bridge Loans?
The bridge loans are associated with commercial property or investment that is in the transitions process and doesn't qualify for traditional financing. On the other hand, hard money loan is not just associated with asset-based loans but also to distressed financial conditions. This may include arrears on existing mortgages.
Hard money lenders generally prefer to securitize collateral for loans. That collateral may be in the form of home or any such property. This collateral may go to the lender in case the borrower defaults on payments. Therefore real estate makes for an excellent vehicle for securing hard money loans, provided that the property for the loan terms has equity.
When it comes to the qualifying criteria for hard money loans, several factors are considered which may vary from lender to lender and loan purposes. These include income, credit scores, past loan history number of dependable, etc. But one of the major criteria for approval of hard money loans is the value of real estate to be collateralized.
As the credit industry was witnessing big changes in the late 1950s, the hard loan industry got the right opening to strike upon. The term hard money is used almost exclusively in the United States and Canada. These loans are quite common where there is a huge demand for fast loans. In the field of commercial real estate, the concept of hard money has now become an alternative last resort for homeowners looking for capital.
Hard Money Mortgage loans are more expensive than traditional sub-prime loans. These interest rates are not dependent on Bank rate and the private investors lend them only at rates higher than the normal mortgage based lending rates. As these loans are not quite based on the credit ratings of the borrowers, so it is very obvious for them to offer these at higher prices.