A hard money loan is a term that is used often, though most people are not 100% sure what the term really means. With so many different definitions floating around out there it’s hard to really know which one is correct.
A hard money loan differs from a traditional bank loan: the borrower taking out the loan usually has very little collateral and is deemed to be too high risk for traditional lending institutions. The money is usually loaned from a private business or investor and is given based on the applicant’s current property value, taking into account the borrower’s inability or willingness to pay back this loan.
Hard money loans, also known as private money loans, are almost always a last resort for the borrower. Hard money loan customers have usually already been turned down by traditional lending institutions because of bad credit or other financial problems leaving them with few options; their only chance in obtaining the much-needed capital to help make bad situations better via a hard money loan.
Finding a hard money lender in Tucson is not an easy task unless of course, you’re actively searching for one. And they don’t come cheap. A hard money loan normally has an extremely high-interest rate with a lower Loan to Value Ratio.
Hard money lenders are not loan sharks or in any way affiliated with black market or nefarious lending practices. Hard money lending is a legitimate way to retrieve a loan if you are in dire need. They take into consideration their client’s situation and their property to ensure that in the event that the client cannot pay back the hard money loan, their homes and property possess enough value that the lender can make a profit when they foreclose on it.
Borrowers facing foreclosure. Once a borrower is behind 120 or even 180 days, the foreclosure process will have started making even subprime lenders nervous and unwilling to lend. Another example would be people who want to refinance their expensive homes in order to cash out some of the equity. They will often turn to a hard money loan because they often come without all of the restrictions a red tape often associated with a traditional lending institution. Real estate investors looking for Fix and Flip loans will also turn to private money lenders as well for the very same reason.
Be sure to visit our Hard Money Loans Page for more information regarding the many different types of hard money loans and private money loan vehicles we offer.