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Announcement: Benefits Of A Hard Money Loan

March 3rd, 2010 Posted in General

This post looks at the benefits of a hard money loan, which is a non-standard type of loan that is provided by private companies or individuals and not by banks and other sources of conventional loans. The hard money lender is willing to take bigger risks that the banks do not want to cover because the loan is not based on the credit rating or score of the borrower but on the value of the collateral, which is usually a real estate property. To compensate for the higher risks undertaken by the lender, higher interest rates and certain fees are charged. Basically, borrowers are interested in a hard money loan either because they are in a hurry to obtain the money or they are incapable of getting a loan from the usual sources.

One of the primary hard money loan benefits for real estate investors or buyers is that it can be obtained during those times when there is not enough time to get a loan from a bank or when it is not yet possible for a bank to provide a loan. In these cases, a hard money bridge loan is often needed. For example, if a homeowner is in the process of buying a new home while selling the old home, he or she may need the loan to pay the down payment for a particular property while the proceeds from the sale of the old home are not yet available.

The benefits of a hard money loan also become obvious when the borrowers are trying to buy time to save their properties from foreclosure. In this case, the hard money loan is used to pay for the outstanding loan to remove the home or property from foreclosure status. What this means is that the borrowers are quite sure that their financial situations will soon improve and that they would be able to repay the loan when the time comes.

A real estate developer may also take advantage of a hard money loan during those times when a bank loan is not yet possible. For example, a conventional loan is not yet permissible when the permits for the project have not yet been approved because the bank could not be sure that the project would push through. The developer gets the non-standard loan to finance the project and after the permits have been approved, he or she gets a conventional loan and repays the former loan.

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