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Hard Money Lenders

In the business of providing loans to people, you can always take the easy if you have good credit, or you can take the hard way by availing hard money loans that are given out a much higher interest. Just from this statement, any one could tell that this has nothing to do with banks that are very careful when it comes to giving out loans according to government regulations.

For one, hard money lenders are actually private lending companies that offer a specialized type of real-estate backed loan. What this means for its user is that these short-term loans require collateral (usually in the form of real estate) to insure the loan just in case something went wrong. So, the amount of the loan is only based on the current value of the property, and no more.

And if that’s not enough, hard money lenders charge a higher rate of interest as opposed to federally regulated banks, which has an upper limit that has been set to protect the consumer. And it is here that the risk is, as once the customer defaults, the rate of interest can go up to atrocious levels with no protection from the government or laws that have been put into place.
In some cases, rather than funding the business or individual with an upper-limit of 65% of the property value, one can also include the business or personal assets in order to get more funding. Therefore, some borrowers add additional property to increase the value of the loan, which is known as cross-collateralization.