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Hard Money Loans 101

Most adults are familiar with the process of securing a loan and the different avenues through which a loan agreement can be made. Despite this solid general knowledge, however, the reality is that many intelligent individuals aren’t completely familiar with all the different types of loans that exist in today’s multifaceted business landscape.

 

Specifically, hard money loans (in the US and Canada, that is; other nations use different titles to describe the same loan type) are perhaps the most misunderstood of all today’s loans.

 

To help readers better understand hard money loans, let’s take a look at what the loans are and what they entail!

 

What are hard money loans?

 

In short, hard money loans are loans that’re made to borrowers with property serving as collateral. Borrowers agree to receive a certain amount of money at a specific interest rate during a detailed period of time. If a borrower defaults on a hard money loan, the lender will confiscate the property that was put up as collateral.

 

Hard money loans often involve large loan amounts and high interest rates. The loans are, in many ways, like higher-stakes pawn-shop credit. Borrowers put up valuable collateral to receive a sizable sum, and to get their collateral back, they pay for their loan and its agreed upon interest.

 

Advantages of Hard Money Loans

 

Hard money loans have a few distinct advantages over other loan types.

 

First, hard money loans are issued with little consideration given to the borrower’s credit history, credit worthiness, income, and financial background. These factors are major roadblocks for many borrowers who try to receive traditional loans, and to be sure, they directly impact the sum that a lender provides.

 

With hard money loans, because of the aforementioned collateral, lenders will be covered even if borrowers don’t pay them back, as they can simply confiscate the property that was leveraged. This isn’t necessarily a good thing for borrowers, but it does mean that their credit won’t prevent them from receiving funds.

 

Next, hard money loans can be applied for and received quickly. Because lenders don’t have to research hard money loan borrowers as much as they have to research other loan recipients (because of the collateral, once again), the entire process, from application to distribution of funds, is rather expedient.

 

Lastly, hard money loans afford borrowers large sums, in comparison to other loan types. Borrowers put up valuable collateral and, in turn, receive considerable amounts of cash.

 

Disadvantages of Hard Money Loans

 

Hard money loans are unique, and every financial situation is different; it’s tough to say what the universal disadvantages of the loans are.

 

Generally speaking, however, the valuable collateral that must be supplied to receive a hard money loan and the high interest rates that accompany hard money loans are considered to be disadvantages.

 

As was stated initially, many finance-savvy individuals aren’t aware of what hard money loans are and what they entail.

 

Hopefully the information included in this guide proved useful to readers who were previously unfamiliar with hard money loans. This type of loan isn’t especially complicated, but it is dissimilar from most other loan types. Similarly, hard money loans encompass unique advantages and disadvantages that must be considered by borrowers prior to their signing on the dotted line.

 

Thanks for reading, learn more at: https://www.delanceystreet.com/

by Leonard on Spodek Law Group
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