The term “hard money lending” is used to describe a type of lending where the lender does not rely on the security of the borrower’s assets to repay the loan. Instead, the lender relies on the borrower’s ability to repay the loan by either earning an income or selling assets. This type of lending is often used for businesses that need quick access to money in order to cover short-term expenses.
What is hard money lending?
When most people think of borrowing money, they think of going to a traditional bank. However, there is another option: hard money lending. This is a type of loan that is given by individuals or companies who are not traditional lenders, such as banks. Hard money lenders typically specialize in lending to people who need money for a specific purpose, such as real estate investments.
If you are thinking about borrowing money from a hard money lender, it is important to shop around and compare interest rates and terms.
Origins of the term “hard money”
The history of hard money lending can be traced back to ancient Greece and Rome. In these societies, lenders would use their personal assets as collateral for loans. This type of lending was known as “pawnbroking”. In medieval Europe, pawnbroking became popular among the lower classes because it allowed them to borrow money without having to go through a bank.
Hard money lending began to grow in popularity in the United States during the 1800s. The term “hard money” was first used in the United States during the 1800s to describe loans made using cash, gold or silver. The term “hard money” became popularized due to the ability of these loans to be repaid without having to turn over collateral.
Why borrowers choose hard money lenders?
Some borrowers choose to go with a traditional bank or credit union, while others may opt for a more nontraditional route and borrow from a hard money lender. So, why do borrowers choose hard money lenders?
There are several reasons why borrowers may decide to work with a hard money lender. Perhaps they need the money quickly and don’t have time to go through the traditional loan application process. Hard money lenders can often get loans approved and funded much more quickly than traditional lenders.
Another reason people may choose a hard money lender is because they need funds for a project that isn’t eligible for a loan from a traditional lender. Maybe the borrower wants to buy and rehab a property but doesn’t have enough cash on hand to cover the purchase price plus the renovation costs.
Advantages of hard money lending
When you are looking for a loan, there are a variety of options to choose from. You can go to a traditional bank, or you can go to a hard money lender. Here are some of the advantages of going with a hard money lender:
- Speed – When you go with a hard money lender, you can typically get your money much faster than you would through a traditional bank loan.
- Flexibility – Hard money lenders are often more flexible than traditional banks when it comes to the terms of the loan. This can be especially helpful if you need to make last-minute changes or if your credit score is not as high as you would like it to be.
- Ease – It can be much easier to work with a hard money lender than it is to work with a traditional bank. They can often be more flexible with their time and they are also normally more knowledgeable when it comes to the types of loans that you can take on.
Disadvantages of hard money lending
One disadvantage of hard money lending is that interest rates are typically much higher than those on traditional loans. This is because the risk to the lender is much greater in a hard money loan; if the borrower defaults, the lender may not be able to recover his or her investment.
Another disadvantage of hard money lending is that it can be difficult to find a lender who is willing to make a loan. This is because there is a greater risk for the lender in a hard money loan, and lenders typically prefer to make loans that are secured by property.
Finally, hard money lenders often have stricter requirements than traditional lenders. This can make it difficult for borrowers to qualify for a loan.
Is hard money right for you?
In recent years, the popularity of hard money lending has increased as more and more people are looking for creative ways to finance their real estate investments. While this type of loan can be a great option in the right situation, it’s not always the right choice for everyone.
So, what is hard money lending? Simply put, it’s a type of loan that is backed by real estate collateral. Because the loans are secured by property, they tend to have lower interest rates and terms than traditional loans. And because the lenders are taking on more risk with these loans, they typically require a larger down payment from the borrower.