What is a Hard Money Lender?

There are many aspects of the real estate world that require careful consideration, especially dealing with what are known as hard money lenders. Hard money lenders offer special types of loans involving collateralized property – that is to say, offering loans that have been made against property. So, if you deal with a hard money lender in order to get a loan, you will put up your home as collateral.



Hard money lenders do not require the same kind of financial scrutiny of borrowers that banks, credit unions and other lending institutions demand. Because of this, they deal with defaulting borrowers much more frequently than banks. Consequently, they charge very high interest rates. People who are looking for a hard money loan are usually unable to get a mortgage loan through banks because they have credit issues, and hence have nowhere else to turn. They would use their home as collateral. However, hard money lenders will also accept other assets as collateral, such as cars or jewelry or other real estate. Sometimes, they estimate the value of the asset and then offer to loan a percentage of that value. Hard money lenders are often regional in nature, but there are some that operate on a national level. They will often work through brokers, but individuals can also approach them.

Rules and regulations concerning hard money lenders are different from state to state. They also deal with individual and private consumers differently from businesses that are seeking a hard money loan.

If you’re thinking of using a hard money lender in order to obtain a loan, be sure you sit down with a financial adviser or a bank representative and explore all your options in as much detail as possible. Hard money lenders charge very high interest rates, and you could have a hard time paying off your loan. It makes sense to know what you’re doing beforehand.