![]() They are more interested in the collateral, which they can take and sell if you’re not able to repay the loan. Hard money lenders are actually less concerned about your ability to repay the loan. Hard money is a way around these potential issues. Traditional lenders are interested in credit scores, borrowing history, and debt-to-income ratio-which they view as factors indicating your ability to repay your loan. While banks have made applying for a credit card a simple online process, applying for a mortgage is still a process that can take months. Getting approved for a loan with a more traditional lender like a large bank is a painfully slow process-and investors in fast-moving industries cannot afford to be slow. Their focus is not on the borrower, but more on the asset the borrower wants to purchase or improve. ![]() By contrast, hard money lenders know that they’ll either get their money back (with interest) or they’ll acquire some real estate. Traditional lenders invest lots of time and energy analyzing whether or not a borrower can repay the loan, and particularly if they can repay it with monthly payments-since it would be unlikely for a consumer purchasing a home to pay off a loan in one large lump sum. They know that the loans they issue are short-term loans with higher interest rates, which will provide them with financial benefits and minimized risk. Hard money lenders don’t care about the ability of the borrower to make monthly payments as much as they care about getting their money back, or having a nice piece of property as collateral. Their asset-based loan is a way for investors to obtain funding for an investment, regardless of their personal credit score or work history. This is because hard loan lenders are engaged in asset-based financing. ![]() Noticeably missing from this list of steps are some of the concerns that a borrower would have to face when working with traditional mortgage lenders, such as working on their credit score, securing a well-paying salaried job with a long-term track record of success, and all the various other odds and ends that make up traditional consumer financing. Hard money loans are often provided by investors or companies at higher interest rates than conventional loans, both because of the shorter term and the higher risk. A hard money loan is when a borrower receives funds in return for offering up real property as security.
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