what is a hard money loan

Facing Hard Times With Hard Money Loans

Traditionally, when people are facing a financial crisis, they turn to “soft money” loans. These loans are based on things like credit reports and total income for a household. Because of their approval being contingent on your credit rating, they can be very hard to qualify for and often result in a rejection for people who don’t have the income or credit rating to back up a low interest loan. Enter the hero in this scenario: The hard money loan.

What’s a hard money loan?

A hard money loan is a loan based on real property (one of your assets). Also known as collateral, your physical property can help you secure a loan even if you have low income or a terrible credit rating. And here’s the magic behind them. Anyone can face a financial crisis and turn to a hard money loan. Typically, the property will be something like a vehicle (as in the case of a car title loan) or a piece of property (like a home). Unlike pawn loans, you don’t have to give up your property to get the cash in your hand.

Who Do Hard Money Loans Help?

Not everyone on earth has a lot of money to spare each month. And sometimes emergencies occur in life:

– High amount of debts
– Car breakdowns
– Medical emergencies
– Lack of food for family
– A need for an emergency move to another apartment or home

And the list goes on and on. Hard money loans are there to protect people who are facing situations just like this, as they try to pull themselves up from their pit of financial distress and get back steadily on their feet. Even if you have a hard road ahead, hard money loans give you something to fall back on in case of financial emergencies.

You don’t need a minimum income, either, like with soft money loans. All you need is enough income to cover your monthly payments, the willingness to keep good communication with your lenders, and the title to your property that shows it’s yours to take out a loan on. If you have all of these things, you can get the hard money loan help you need, no matter what your situation is.

Some of the Fine Print

Hard money loans have higher interest rates than soft money loans do. The lender is taking a risk by lending to you, given that you have a low credit rating and limited income. Still, they should be fair with you and adhere to the laws in their state when they lend to you. Interest rates are usually capped, even on hard money loans, so don’t go into a very high interest hard money loan before ensuring that the lender is following state requirements.

Remember that hard money loans are typically of shorter duration than soft money loans. The significance of this is that you’re going to need to pay the loan back quicker than you would need to pay back a soft money loan. Always talk to your lender and be clear about when your loan is due. If you don’t pay back in time, you could lose your property, and that’s the opposite result you want from a hard money loan! As long as you adhere to the restrictions and stipulations of your hard money loan, you will find that they are great in emergency situations when you have nowhere else to turn. Despite the higher interest rate and shorter duration of payback, you still get the cash you need, and sometimes that’s all that matters.