In the market today, it can be extremely difficult to obtain loans in times of need from banks. Banking regulations are quite strict and their willingness to loan to you is based on many factors. If you do not meet their requirements it can be near impossible to obtain the loan you want. Due to this, many turn to private lenders to obtain hard money loans.
Hard money loans are asset-based loans in which the loan is backed by the value of real estate. Private lenders do not face the same regulations as banks and may be much more flexible in terms of who they will loan to and they type of loan they will issue. This flexibility, however, means that they will be issuing to more risky borrowers and therefore face a higher risk of default and must apply higher interest rates to these hard money loans.
Conventional loans and their specifics are based off of the credit score and reliability of the borrower. Conversely, hard money loans are qualified based on the value of the real estate being collateralized rather than the credit score of the borrower. They may use the credit check to look for past bankruptcies or foreclosures, but the main criteria the lender looks for is the ability to repay.
A major advantage of hard money loans is the time to close and the short length of the loan. While conventional bank closings can take up to 45 days, because there is little bureaucracy with hard money loans they can sometimes close in as little as a few days. Bridge Loan Network is a company helping to expedite these closing times by providing a software that matches up potential borrowers with lenders. Their software takes information about the type of loans that borrowers are looking for and the loans that lenders are willing to give and connects them. Bridge Loan Network’s software also provides document storage and management for ease of access and to ensure that all documentation is available in one, easily accessible location for all parties involved.
Hard money loans from private lenders can be a great option for people who cannot obtain a conventional loan from a bank.