In recent history, hard money lending has gotten a bad rap, and it’s unwarranted. Many people associate hard money loans with predatory lending, whereby lenders seek out unsuspecting borrowers and give them loans with incredibly high interest rates that the lender knows the borrower is going to have a hard time paying back on time. That’s not how hard money loans really work. Essentially, hard money loans are types of loans whereby borrowers who can’t secure a loan from a bank are able to get their hands on the cash they need. Maybe the borrower is unable to secure a loan from a bank in the amount that they need, so they turn to a hard money lender who will provide them with the capital they need.
People assume that hard money lenders must be giving out loans to anybody who asks for them, but that’s not really how it works. Banks won’t give loans to certain people for a number of reasons, and many of those reasons aren’t that big of a deal. Thus, a hard money lender will step in to help the borrower out. However, they won’t just give a loan to anybody who asks for one. They assess the financial state of the potential borrower, figure out what they’re going to use the money for, and then determine whether or not they believe the person is going to be able to pay the loan back. Ultimately, hard money lenders want their borrowers to be able to pay their loans back, so they’re not just going to give loans out to people who won’t be able to do that. If the borrower can’t pay the loan back, then they’re out the money as well. Thus, they only want to lend to people who they truly believe are going to be able to pay their hard money loans back, with interest, on time.
As you can see, the bad rap that some hard money lenders get is totally unwarranted. There really are some specific circumstances under which a hard money loan makes a great deal of sense for both the borrower and the lender. For example, if someone is looking to buy a home in the hopes of flipping that home quickly for a profit, it makes sense to take their loan out from a hard money lender. That’s because the hard money lender can get them the capital they need quickly, and then when the home sells for a profit, the borrower can quickly pay the hard money loan back. The great thing about this kind of situation is that both the lender and the borrower have skin in the game, so they both have an incentive to get the house sold quickly. It’s circumstances like this in which hard money lending, like that provided by Montegra Capital Resources, makes a great deal of sense. Both the borrower and the lender are able to make a nice profit in a short amount of time, and there’s not a great deal of risk that either party is taking on.