Hard Money lending is collateral based. Collateral can include real estate, business assets, receivables, and personal assets such as cars, art, jewelry, etc. Most hard money lenders prefer real estate as collateral. Real estate holds its value well and is immovable making it much easier to collect on if the borrower stops making payments. Since collateral is the main requirement, credit, income, and other person qualifications are not as important, and often are ignored in the underwriting process. But don't be surprised if a hard money lender in Atlanta asks for your personal information and runs a credit check. They still want to know who they are dealing with in order to prevent fraud.
Common misconceptions about what hard money lending is include: unsecured debt consolidation loans, personal loans, and loans for more than what the collateral will allow a lender to recoup from the foreclosure process. These loan types are best served by banks and large institutional lenders that feel comfortable with the additional risk of losing money in the event of non-payment. Most hard money lenders will not make construction loans, no money down purchase loans, and rehab loans based on fixed up values. These are special niches that only a small percentage of lenders cover. |
