Hard money lending is referred to as equity lending, trust deed investing, or private lending. In simple terms, it is the issuance of generally low leverage, short-term loans that come with a relatively higher interest rates. Such loans are issued by private firms, individuals, or groups, and are backed by equity in hard assets. The most common hard asset is real estate.
When you are looking for outside financing options, hard money lenders in California and banks are generally the place you can turn to. These methods of financing are mostly used when it comes to various projects, but the procedures in the two can run a little bit differently, and some can affect the outcome of your project. For instance, in construction projects, time is money, so the quicker the loan is processed the better the outcome it likely to be.
In this case, it is essential to identify the particular situation in which you are in, for you to choose the best option to suit your needs. For investors planning to remodel a property occupied by the current owner, the best option would be to look elsewhere as it would be difficult to find a hard money lender to work with you. The reason behind this is that many lenders usually prefer short term lending, so that they can close the deal in less than 6 months.
In most cases, hard money lenders don’t have the infrastructure that a traditional bank or lending institution would have. Because of this, there are often less people to do the paperwork, process the loan terms or do the work involved. On the hard money lender’s side, there is usually a lot of speculation, since a high risk is involved. On the bright side, there is much less paperwork needed when processing hard money loans. The only information they need is the value of the property listed as collateral as well as some information on the investor. This is why many people often turn to hard money lending because of a poor credit rating or even no access to credit at all.
In some cases, investors may be in need of money quickly, and when they don’t get it in time, they could suffer big losses. If a loan is applied for through the banks, it could take a long time due to the paperwork involved, and the time needed to review the various aspects that determine your qualifications for a loan before the money is actually received. Therefore, this is often not an appealing route for most people, and most often assume that they may be declined due to the cumbersome paperwork asked by the bank.
For hard money loans, the deciding factors should include the condition of the property and the amount of risk involved when working with that company. Most firms will have specialists to work with you further, and are more considerate on some situations, since they would get a higher rate in return. Hard money loans can therefore save your project entirely, since you can access the money in a short amount of time provided you have proper collateral.