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We are here to help you to understand what hard money loans are, and what is this type of loan is used for. What are the pros and what are cons.
A hard money loan is a type of loan that is secured by real estate, the property is used as collateral and is usually not available from traditional banks.
Hard money loans are typically used in real estate transactions, a hard money loan is given by individual investors or companies, and not traditional banks because they are generally a higher-risk type of loan.
As hard money loans are generally riskier, they come with higher interest rates, they can lead to a substantial financial burden if the borrower defaults on the individual investor or company.
In most cases, hard money loans are used by individuals who flip properties, to fund potential projects. In addition, hard money loans can be given for many different reasons.
Since hard money loans can be funded quickly, they are often used for wholesale flips. Wholesale funding is beneficial because it can be used instead of contract assignments and does not allow the buyer and seller to know your financial spread.
As mentioned, home flippers do seek hard money loans to fund their future projects and provide the project as collateral. In addition, the loan amount is generally based on 90% of the purchase price plus 100% of the repair costs.
Like home flippers, some individuals use these loans for property projects that are intended to be rented. Such types of acquisitions are funded in the same way as home flippers but are expected to be refinanced for a longer-term once the actual project is completed.
In the most basic economic context, hard money is used to describe physical currency, such as coins, while soft money is used to describe paper currency. In regards to finance, they take on a different definition.
A hard money loan refers to asset-based financing where the borrower receives funds that are secured against real property. In most cases, private investors are the biggest lenders of hard money loans.
A soft money loan refers to an asset-based form of financing that carries a below-average interest rate and is generally easy to acquire. Although a soft money loan is still secured by real property, it is considered much easier to acquire in comparison.
Do not get confused with political hard money donations, hard money and soft money refer to campaign funding that comes from different types of contributions, from individuals or corporations.
Hard money refers to donations used to directly support or oppose a candidate running for federal office.
We hope that you have found this article useful, we are always trying to produce the content that you find helpful, at Car Title Loans California, we can help you with the car title loan that you need, we will use the equity that you have in your vehicle, call us today for your same day funding.
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