When people talk about hard money they are simply referring to the process of borrowing without the involvement of traditional mortgage lenders. As long as you have collateral, an individual or even an investor will offer you the money you want. In the event that you need the money within a short period of time then hard money is the best option. Also, it will be a lifesaver if the traditional lenders have refused to approve your loan. Traditional lenders are famous for the long duration it takes for them to approve loans not to mention the kind of requirements which have to be fulfilled before the loan is approved. However, this is not the approach that is followed by hard money lenders. The lenders are only interested in knowing whether you have collateral or not. Also, there isn’t much focus on whether you can repay the loan or not because of the collateral.
The asset you offer as collateral will be the main interest for the hard money lenders especially when it comes to determining of the value of the particular asset. The repayment period can be just a year or 5 years because these are usually short-term loans. The loan is processed fast in this option which is why a lot of people opt for that. The only thing that will be standing between you and loan approval will be asset valuation. The lenders are happy when you pay back the amount borrowed and the interest on time because they do not enjoy taking possession of your property. However, this is also the reason why they do not give much effort to reviewing your bank statements or even verifying your income and the other things traditional lenders do. Traditional lenders can have you losing out on many great investment opportunities because they took too much time before approving the loan.
In addition, hard money is loved for the flexibility it offers. Traditional lenders are very rigid but the great thing about hard money agreements is that they are based on a particular situation. The underwriting procedure is not standardized in hard money and decisions are made based on the situation at hand. This means you can negotiate with the lender on various issues including repayment schedules. Also, the lenders are understanding individuals who will be willing to listen if you have a problem. The approval rates are high and the process is fast which has seen a lot of people opt for this.