In lending, there are two important terms: Soft money loans and Hard Money loans. The first type of loan is the most traditionally known: They’re offered by banks and rely on two primary statistics to get you approved for a loan. Banks look at income and credit rating when approving you for soft money loans. Interest rates are typically lower, repayment is of a longer duration, and you don’t risk losing any property with soft money loans (although you can do a negative number on your credit rating if you don’t repay the loan). Hard money loans are different. They are offered by often private lenders, not banks, and they don’t require you to have good credit or a minimum amount of income to be approved.
What’s a hard money loan?
Hard money loans are a form of last resort loan that rely on your physical property for approval. More traditionally known as collateral, the hard money loan’s asset is what you are willing to risk to secure the loan. In the case of a title loan, you take out a “hard money” loan by using your vehicle as collateral. A private lender, not a bank, will approve you for the loan as long as you have the amount of income needed to repay the loan each month. You don’t necessarily need income from employment to get a hard money loan, just some form of money coming in, even if it’s disability income, child support, or alimony.
The collateral could be your vehicle, your home, or another form of major asset that allows the hard money lender to get you approved without the higher credit rating or minimum income required for bank loans and things like payday loans (often approved based on a minimum income from employment). Hard money loans are obviously advantageous to people who are facing a financial emergency without a good credit rating or income required to allow them to get help somewhere else.
Is A Hard Money Loan Right For You?
Hard money loans can be taken out for any reason, but people typically take them out because they simply must have cash for something. If you get an eviction notice but don’t have the cash to pay your rent, obviously a hard money loan might be worth the higher interest rates and shorter repayment terms. If you just want to take an early vacation, then a hard money loan might not be worth it. In this case, it might be better to wait until you have the income needed to take that vacation. Most people take out hard money loans for things like:
– Medical bills
– Debt Consolidation
– Car Repairs
– Residence emergencies
– Food you can’t otherwise get
If you simply need cash in your hand in a short period of time – usually 24 hours – then a hard money loan is going to be your best bet to get approved if you don’t have good credit or a lot of income.
Applying For A Hard Money Loan
It’s easy to apply for a hard money loan and usually only requires you to show that you own the property you’re using as your asset/collateral. As long as you own the property, there’s usually no credit check and you only need to verify that you have enough income to repay your monthly payments. Remember before you apply that you’ll need to repay the loan in a shorter period of time than soft money loans. If you know that you can repay the loan, it’s your best shot to get money in 24 hours.