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What is a Hard Money Lender?

The term “hard money lender” may be unfamiliar to some, but it is something that more people should be aware of. Hard money lenders are opportunistic private lenders who lend outside of traditional banks or credit unions to an individual or business.

Hard money loans are funded by an investor or group of investors who make loans based on factors other than an individual’s credit history. Hard money lenders loan money on a short-term basis, and secure their loans with collateral, usually in the form of real estate.

Hard money lenders usually charge higher interest rates than traditional lenders, however this is to accommodate the additional risk that they are taking on.

Because people are unfamiliar with what a hard money lender is, many people tend to get the wrong idea about them. These misconceptions may lead people to avoid hard money loans without any real understanding of what a hard money loan is.

Dispelling Misconceptions about Hard Money Lenders

  • Misconception #1 – Hard money lenders are loan sharks

Hard money lenders are simply lenders who loan outside of traditional banks or credit unions. Instead of looking at a person’s creditworthiness, they focus on their ability to put up collateral in order to get a loan. Hard money lenders are regulated and must comply with laws that make hard money loans safe for both lenders and borrowers.

Hard money lenders will not make a loan unless they believe that they can make a return, so they will not lend to people that they believe will not be able to pay them back. Loan sharks set loan terms that make it difficult or impossible for borrowers to pay back and rely on desperate people to agree to their unfavorable terms.

  • Misconception #2 – Hard money loans are only for desperate people

Most of the people who seek out hard money loans are business people or individuals who would prefer to work with private investors. Many of these people are working with a condensed time frame and need financing quickly, something that hard money lenders excel at.

Hard money lenders are also able to loan to people with less than stellar credit history, because they have the backing of the borrower’s collateral if the borrower defaults. The terms of hard money loans are also much more negotiable than bank loans, which help individuals and businesses find loans that best suit them.

  • Misconception #3 – Hard money loans have complicated and restrictive rules

The goal of hard money lenders is for both sides of the arrangement to get what they want. Lenders aim to make a profit, but also want to help borrowers achieve their business or personal goals by lending them the crucial capital. Hard money loan terms are usually negotiable, and an agreement can be struck that benefits both parties.

  • Misconception #4 – Hard money loans are more expensive than traditional loans

While interest rates on hard money loans are higher than traditional loans, hard money loans provide benefits that traditional loans cannot, which can help make a borrower a large profit in the long run. Hard money loans can be funded within just a few days, enabling borrowers to act quickly in acquiring investments and help get their business going.

For example, a real estate investor can secure capital in a short time frame in order to get a bid in on a sought-after property in order to fix-and-flip in a short period of time. Additionally, the convenience of a hard money loan often outweighs the higher cost associated with it, allowing borrowers to streamline the process and focus on their business.

A Hard Money Lender in Minneapolis, Minnesota

Whether you need a loan to help build your business, acquire real estate, or fix and flip houses, your trusted local lender, Hard Money LLC is here to help. Applying for a loan only takes a few minutes, and funding can be arranged within just a few days!

Do you need a Hard Money Loan for your next real estate purchase or refinance fast?