Why Have Hard Money Lenders Earned Such a Bad Reputation?

[Corey Dutton]

Hard money lenders have earned a bad reputation in the area of lending for no good reason. In fact, they are often grouped into the same category as pay day lenders. Pay day lenders hold a larger share of the consumer lending market in places like Europe, as compared with the U.S. The United Kingdom recently launched an all out assault against pay day lenders, setting caps on interest rates that they are able to charge consumers on short-term loans. This government action against pay day lenders in the U.K. has eliminated most of the players in the market. But hard money lenders, particularly those that lend on real property such as real estate, are distinctly different from pay day lenders. In fact, hard money lenders fall into a completely separate category than pay day lenders. So why then, have hard money lenders earned such a bad reputation?

Because the general public barely understands consumer loans such as auto loans and mortgage loans, hard money loans are quite a foreign topic for most. There are two primary reasons that hard money lenders have such negative associations. Because hard money has not been standardized like traditional mortgage lending, there is a wide difference between one lender and another when it comes to service standards. The negative customer service experiences many borrowers have had in hard money, is often due to the lack of standardization in the industry.

Borrowers searching for hard money loans often encounter predators or upfront fee loan scams rather than legitimate hard money lenders. The lack of regulation in the area of hard money has opened it up to con artists and predators, another reason hard money has earned such a bad rep. What are some other reasons that you would add to this discussion for why hard money has earned a bad reputation?

Posted by Corey Curwick Dutton, Hard Money Lender