Direct Hard Money Lending
Direct Hard Money Lending Is Mainstream Financing
In business, you hear about a lot of different resources for borrowing money. Direct Hard Money lending may be one of the alternative resources for getting a loan when time is short. This form of private funding also works for people who need to borrow money for something other than business capital. Commercial real estate investors use hard money loans for property acquisition and homeowners can use the money to stop foreclosure or to prevent loan defaults. Borrowing and using direct hard money lending is a very common practice. Anyone with sufficient equity in real estate or other “hard” assets can qualify for direct hard money lending.
People Who Borrow Hard Money
Smart real estate investors understand that the cost of borrowing money can be calculated into the other costs associated with purchasing and rehabilitating a property. The important thing to remember is borrowing from traditional lenders like banks and mortgage companies takes time. Sometimes it can take a few months or more to get the funds needed to acquire a property. Hard money is fast money because it focuses on the equity value of a piece of property, not the borrower’s credit score or income history. Hard money lenders like to work with experienced borrowers who understand how hard money loans work and how to best utilize their value. However, many lenders will work with first-time property flippers and homeowners. Other people who borrow hard money do it because:
- Fast turnaround – When time is short and funding is needed quickly, the time required for funding a hard money loan can be as little as 24 hours.
- Low credit score – Many traditional lenders want debtors to have a credit score of 700 or higher and not everyone has that score level.
- No credit history – Young people and new businesses don’t have long credit histories for lenders to utilize.
- Foreigner – New residents and citizens can have difficulty establishing credit.
- Bridge loan – When a loan comes due before another loan can be arranged, a hard money loan can “bridge” the gap between the two loans.
- Multiple assets – Complicated asset holdings used as collateral are difficult for banks and impossible for mortgage companies.
Hard Money is Safe Money
The popularity and widespread use of direct hard money lending has prompted states to enact laws and regulations protecting consumers from predatory practices within the hard money lending industry. The rules and regulations are similar to those used to oversee all loan sources like banks, credit cards, mortgage companies, payday lenders, and others that can provide loans to the public. Despite being known as “private transactions”, hard money loans are under the supervision of both state and federal authorities. What it all means is that direct hard money lending is a legitimate, regulated, and valuable resource that satisfies the needs of many borrowers. When time is at a premium and the need is greatest, it’s good to know that there are hard money lenders with the resources needed by homeowners, real estate investors, business people and many others ready to fund deals.