There are many kinds of loans and many kinds of people too, claiming for the loans. Their requirement is different, their status is different and their possibility of getting loans also differs. Lenders or banks have their own criteria which is fulfilling the necessity of the borrower. Today we are narrowing the views from different kinds of loans to hard money loan. Hard money loan, which we are going to discuss in this piece of article possess different features than other kinds of loans. Let’s explore the features that make it different from others.
In layman’s terms, hard money loans are given in exchange of money with a little different requirement than other loans. In this loan, the moneylenders are not dependent upon the creditworthiness of the borrower rather they look for value of offered collateral. The previous track record of the borrower has not been tracked for sanctioning the loan. Collaterals are involved in order to make sure that if borrower differs or defaults, then they will have something in hand to get their amount reimbursed.
Such kinds of loans have never been the first priority of people. They go with other options and when everything else failed, they find it last resort. Many a times conventional kinds of loans have been rejected by banks, citing many reasons. Banks have their own requirements and if the individual fails to fulfill any of the criteria, then they cannot sanction the loan. After going through these situations, hard money loans come into the scene. The providers of hard money loans could be an individual or an institution.
The situation of hard money loans arises when people have asset and they need money from some other source rather than this. When selling the home is not on their mind, but somehow money is needed, the home can be used as collateral. This is like a situation which is beneficial for both, lender as well as borrower. If the borrower repays single penny within given duration, then he will have money as well as home. And the moneylender will also be in safe side as the borrower pays back the money with required interest. This is the prevailed scenario throughout the world.
Collateral can be used for any kind of loan and it is easiest way to get loan approved too but why people do not get it done despite having valued asset. One major reason is bad credit worthiness of person applying for loan at banks. Maintaining a good credit is necessary to get loans approved from banks. When no bank agreed to sanction loan on the basis of bad credit, then hard money loan comes into existence and people opt for it. In most of the cases, borrower fails to repay money and lender ends up owning collateral.