Why are Hard Money Loans so Hard to Understand?

Why are hard money loans so widely misunderstood? A hard money loan is called such because it’s a loan using a hard asset as collateral, usually real estate. Because hard money loans are non-bank loans, most people don’t understand the process or the costs of a hard money loan. For real estate investors, hard money loans are used to finance investment real estate. Knowing who the real hard money lenders are versus the fake lenders is difficult for newbies who don’t have established relationships with hard money lenders.

For this reason newbies are often “taken” by fake lenders who we call “fee collectors.” These lenders will rarely make a real hard money loan but instead live off the fees collected from borrowers who will never get a loan. These unsuspecting borrowers pay a fee to apply for a loan that they will never get.

In my industry of private money lending, this kind of upfront fee scam is happening every day, all over the U.S.A. It is a sad reality of the non-bank lending world, and all the more reason you should always go with a hard money broker or lender that you trust. Once you discover the real lenders from the fake lenders, you will be in a better place. For more on the differences between a hard money loan and a traditional bank loan, read one of our past blog posts on this topic about ‘commercial hard money’ and how it differs from traditional bank financing for commercial properties: http://privatemoneyutah.com/commercial-hard-money-loans-not-widely-understood/http://privatemoneyutah.com/commercial-hard-money-loans-not-widely-understood/

Posted by Corey Curwick Dutton