Hard Money Loan

A hard money loan is a private loan. In this process, the lender transfers actual cash to the borrower. Used for the purpose of making a large purchase (typically real estate), the hard money loan can be risky for the lenders. As such, the interest rates usually run much higher than on loans for real estate purchased in a more conventional manner.

Because the hard money loan is a private loan, the same strict guidelines in effect for government or bank loans, do not apply. Everything is negotiable

Who Applies for a Hard Money Loan?

Borrowers of hard money loans generally include those who:

• Must have money immediately
• Have income that’s unverifiable
• Have  a home foreclosure in their past
• Have no credit
• Have a poor credit history

If you think of the hard money loan as the pawn shop of real estate, you’ll get the idea behind the concept.

Advantages of a Hard Money Loan

• The money is available in cash
• Little or few questions are asked to qualify the borrower
• The cash can be used as intended or in other  ways
• Terms are negotiable

Disadvantages of a Hard Money Loan

• High interest rates can be charged
• Excessive repayment or penalty fees can be charged
• The home is at risk if the loan can’t be repaid

A hard money loan must be used responsibly or bad credit and even foreclosure can result.

Steve Wyrostek -HomeLoans.org Expert A 20 year plus veteran of the insurance industry, Steve managed departments in the personal and commercial lines areas of major insurers. He’s familiar with how insurance—ranging from boat to workers compensation—works.