Hard money lender offers financial assistance mainly to those persons or businesses that are not confirmed by the commercial banks. The hard money lenders provide collateralized short-term loans and charge higher interest rates than the banks.
The interest rates are higher because the hard money lender faces comparatively more risks than the traditional banks or other financial institutions.
These short-term loans are also known as bridge loans.
Collateral or Security for Hard Money
The hard money loans are provided only if any kind of real estate property is offered as security for the loan amount. But in certain cases, depending on the financial situation and property type of the borrower, some other properties are also accepted as collateral.
Again there are several occasions when the hard money lenders offer small loan amounts to the borrowers for certain reasons. Because of this, the borrowers offer additional security to secure the additional amount.
Risk Faced by Hard Money Lenders
The hard money lenders are always exposed to higher amount of risk. The hard money lending process does not include any kind of confirmation about the source of income of the borrower. Because of this, defaults by the borrowers are very common in these loans. All these risk factors are behind the high interest rates that are charged by the lenders of hard money. But instead of all these, a huge number people borrow money from these lenders because these loans do not depend on the credit reports and any other documents that they cannot produce.
Aspects of Hard Money Lending Market
The hard money lenders can be found in the local or regional markets. These lenders operate in two ways. Firstly, they prefer to operate independently and conclude the process of loan lending through direct interaction with the borrower. On the other hand, the hard money lenders also provide services through a network of loan brokers who act as the links between the borrowers and these lenders. The brokers receive certain amount as their commission. The cost of the loan may differ for different hard money lenders.
Last Updated on : 1st July 2013