For many, the process of securing financing can be a very difficult phase of the larger process of buying property. It is important during this process to consider your needs and credit position in determining what sort of financing works best for you. In addition to more common forms of financing, such as mortgages and home equity loans, there are additional options such as a hard money loan. This is a situation where a lender provides a borrower with a nominal sum of money in exchange for a fee and monthly interest. Just as with other loans like it, the collateral for this loan is the property in question being purchased, but unlike similar loans, the credit position of the borrower is not considered. This means those with poor credit, those who need a large sum quickly, and those who can tolerate higher interest rates and fees may benefit from this type of loan.

No Credit Needed

A major hurdle for many who are trying to secure a mortgage to purchase a property is poor credit. Having poor credit can result in similarly poor terms within the contract of a loan, or may discourage lenders entirely from offering the loan. Borrowers in this position can greatly benefit from this sort of loan structure. The lack of focus on borrower credit history in favor of property equity also accelerates the time it takes to obtain a loan.  

Borrow More and Borrow Sooner

The terms of most mortgages will restrict the proportion of the property value the lender is willing to offer, and the processing time for many mortgages can be months. A borrower is much more likely to receive a larger proportion of the property price under the terms of a hard money loan. The borrower can also expect a much quicker processing time for the loan as the lender needs only consider the property value and equity. For this reason, this type of loan may appeal to those borrowers who intend to improve upon the property.

Consider Higher Interest

The utility of this type of loan should be carefully weighed against its higher interest rates and fees compared to mortgages. Typically hard money lenders will set aggressive interest rates and loan terms to encourage a quick turnaround time on the loan. This means that borrowers who are in a position to quickly repay a loan may benefit from the streamlined nature of hard money loans.