There are many types of loans out there in the world. There are student loans, business loans, mortgage loans, construction loans, and also something known as hard money loans. There are several ranges of people who can serve as hard money lenders. These can include friends and family, acquaintances, and professional hard money lenders. Before taking one of these loans out, there are a few things you need to know about them and this article will take a look at a few of those things.
- Hard Money Loans are Relatively Short: Unlike other loans, which can be taken out for a long period of time, hard money loans are typically short in duration, ranging anywhere from six months to a year, though they can be extended to last longer in some cases. Hard money loans are meant to provide funds for a relatively short project, like renovating a house, that’s why they’re meant to be paid back relatively quickly.
- Hard Money Loans are Secured by Property: Unlike some loans, hard money loans are actually secured by property assets. What this means is, a piece of property or real estate is put up as collateral in order to receive the loan. This is partially why these loans are known as “hard” money loans, because “hard” assets like property are used to obtain the money. If the loan isn’t paid back on time, the property would be at risk for being seized as payment instead (which is always a risk when you put something up as collateral).
- Hard Money Loans are Used for Specific Purposes: A third thing you need to know about hard money loans is that they’re used for specific purposes, usually associated with flipping a house. House flipping is when a run-down property is purchased, renovated over a short period of time and then sold for a profit. Obtaining a hard money loan can make it possible to afford the renovation and still make a profit afterward.
In conclusion, there are several things you definitely need to know about hard money loans. These include knowing that hard money loans are typically secured for a short duration of time. They are also secured by property that is put up as collateral, and they’re also used for specific purposes.