Hard Money Loan

Hard money loan is a type of financing in which the loan is secured by the value of an asset. This means that the loan is given based on the value of a parcel of the real property owned by the borrower. A hard money loan is usually given to borrowers whose financial situations do not conform with the funding standards of common real estate lenders. Examples are home owners with delinquent payments on existing mortgage, or who are facing bankruptcy and property foreclosure.

Housing Loan

Due to the nature by which the loan is secured, as well as the credit standing of its borrowers, a hard money loan charges higher interest rates than the conventional loans. It may seem a bit like a “break-your-arm” shark loan, but a hard money loan is completely different from predatory lending. This is because a hard money loan is designed to help home owners repair their credit report so they can get refinancing in a traditional manner. For example, a home owner has fallen so far behind on his mortgage payment because he lost his job, or any other reasons. This event will render him as a delinquent borrower, tarnishing his credit score in return. Now when he has gone back to work and catch up with his missed payments, he could use the help of hard money lenders. By using a hard money loan to pay-off the original mortgage, the home owner is offered the chance to start fresh and repair his credit reputation. With a good credit report, he then can get a refinance for his property in a traditional manner.