Defining hard money loans
A hard money loan is a kind of loan which is issued by estimating the worth of real estate property owned by the borrower and not on the basis of his credit score. This means that even if your bank account does not present a good picture, you can still get a good deal on a hard money loan by keeping your real estate property as a mortgage.
Who are hard money lenders?
Unlike conventional loans, hard money loans are not issued by banks. Rather, hard money lenders are usually individuals or a small group of people comprising of private individuals.
Which individuals are in need of hard money loans?
Most developers and start-up entrepreneurs are the prime receivers of hard money loans. Hard money is the initial push one needs to initiate their business. Sometimes, the lender can even borrow up to 100% of the purchase price. Hard money borrowers require money on ashort-term basis and usually lack the credit score which is a basic requirement for conventional loans from banks. Hard money borrowers usually use the loan to purchase property, repair it and increase the sale value of the property. Some hard money borrowers then borrow more money from the bank, on the basis of the improved property, and use this new loan to pay off hard money lenders.