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Hard money lenders give loans to borrowers on properties that have different standards than more typical real estate loans. Hard money loans don't give much weight to the credit score of the borrower; they give importance to the value of the collateral property. The credit score is not even considered by the bulk of these lenders. Typical private lenders almost always have lien rights on the particular collateral property. This implies that in case of default in making payment by the borrower, the collateral property will be transferred to the person who offered the loan to the borrower. Because the original loan would only be 70 percent of the quick sell value, the lender will be in far better shape to recoup any losses in the case of borrower default. But when the market value drops, the lender would still be likely to lose a great deal of money. The interest rates of private residential loans will be markedly higher than conventional loans. This is because of the higher risk associated with these types of loans. Often the borrower is in financial distress, may have a bad credit score, has gone through bankruptcy, or meets all of these qualifications. So conventional lenders don't usually like engaging in this type of high risk lending. That means that residential money lenders are almost always local private lenders who are willing to incur the extra risk for the reward of higher interest on the loan, or quick profit should the borrower default. A lot of people think hard money lending is a new phenomenon despite it being around for quite some time. During the twentieth century the credit business has changed in numerous ways. Before it was always very difficult to obtain loans for distressed commercial and other properties. Because of this difficulty, a new solution arose from the market place. Hard money lending was born. The services that hard money lenders provide are of course perfectly legal. They just are not the first choice for people who want to borrow against their collateral property. But some times a lot of capital is need for a business that is not offered by conventional lending institutions. In these cases the only option is the high interest loans provided by hard money lenders.. Learn more about hard money lenders. Stop by Stephen Von's site where you can find out all about hard money loans and what they can do for you.
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