A Quick Way to Secure the Funding you Need
Sometimes securing the funds that you need may not be that easy, particularly in the prevailing bleak economic conditions. While financing institutions are in the business of lending out money, they also need to assure themselves that the money that they invest is secure and will return to them in one way or the other. This is why most of the traditional loans offered by lending companies take a lot of time because of all the verification processes being made. There is, however, one type of loan that offers borrowers a quick way to secure the funding they need. A hard money lending opportunity is a type of loan that is secured by the value of a real asset owned by the borrower.
Hard money lending, sometimes referred to as private lending or equity lending, is a type of short-term loan that carry a relatively high interest rate, and are usually made by private individuals or institutions. Such type of lending opportunity is seldom offered, if ever at all, by traditional financing institutions or commercial banks.
Since those who offer this type of borrowing are aware that hard money lending carries a big amount of risk on their part, they usually require borrowers to secure their loans with real property. The amount of the loan is typically pegged with the value of the real property that was presented as security.
This simply means that organizations or individuals that offer hard money lending would usually determine how much the real property realistically worth is and how big is the equity cushion that the property does provide to protect the loan. This determination is only logical because the lender has to protect his investment in case something untoward happens to the loan. In such case, he must be able to quickly and easily convert the property into cash, in order for him to recover the principal amount, as well as the interest and other relevant fees.
This is why hard money lending organizations or companies offers this type of loan to borrowers with a high interest rate. This is to accord further protection of their investment in case the borrower defaults on his loan. While the interest rate is may be affected by various factors such as amount of the loan and the payback duration, the typical rate usually ranges between ten to twelve percent.
Another factor that is also considered by hard money lending organizations is its exit strategy. Simply put, it is making a determination on how will the borrower be able to repay the amount borrowed at the end of the agreed term. Since this type of loan has a short term, hard money lending organizations usually require a clear and credible method of repayment.