If you are a real estate investor, hard money loans should excite you. Compared to bank loans, hard money loans are easier to secure. The leniency of these types of loans makes them ideal even for investors with low credit scores. The loan-to-value ratios of hard money are 60 to 70%, which means that the lenders are at a lower risk of losses.

The hard money loan industry has remained a mystery to most people. There is a misconstrued notion about hard money lenders and their way of conducting business.

In order to correct that, here is a guide on hard money lending.

Finding Hard Money Lenders

Getting a credible hard money lender is not complicated. Once you have access to a stable internet connection, you can search for private money lenders in your locality. If you search for ‘hard money lenders California,’ you will get a variety of options. However, it is essential to vet the lenders to avoid unscrupulous dealers. Your fellow real estate investors can also advise you on tried and tested hard money lenders.

Real estate events can be another source of reliable information on private money lenders. Interact with other investors to gain insights into the industry. You might just be surprised by how often investors use a hard money loan to close buying deals.

Ideal Situations for Private Money Loans

Qualifying for a bank loan with a low credit score is a challenge. Hard money loans can be ideal when you need to invest despite low credit ratings. Lenders hold the property as security.

When time is a constraint, a hard money loan can be convenient. Borrowing from a bank involves several logistics that can take 30 to 40 days. Private loan approvals are usually quick and easy. Within ten days, you are likely to have money disbursed into your account.

Fix and flip property investors also find private money lenders beneficial because they can access quick loans. Such investors fix properties and sell them to get profits. When flipping houses, the convenience of a private lender is desirable.


The lax requirements of hard money lenders have made them popular over the years. This is because a majority of private money lenders focus mainly on the value of the property you intend to purchase with the loan acquired. If you can make interest payments, a lender will overlook your credit history.

Failure to repay the loan means that the lender uses your property as collateral. Therefore, you will need to inform the private lender of the plans you have for the property and the process of repayment.

However, it is important to note that private money lenders have different terms. Some of the lenders might want to analyze your business plan and determine the borrower’s strength. In this case, they will check the viability of the property to avoid making losses.

Approval of Hard Money Loans

Once you satisfy the requirements of a private money lender, you will first get a verbal approval. A written agreement between the borrower and the lender then follows. This is done to avoid future discrepancies on what was agreed on. The application form filled by a borrower mostly details information such as available assets, liabilities, and income.

In cases where the borrower lacks subject property, they can get a pre-approval letter after applying for the loan.

Note that the geographical location of the property can also be used to determine the approval of hard money personal loans. This is why dealing with a local lender is more convenient for all parties involved.

In Conclusion

If you are a real estate investor, don’t shy away from the myriad of available financing options. In case you have low credit getting a hard money loan can be your best bet. Vet your local lenders and establish the terms of getting a private loan. With well-calculated moves in real estate investment, you can repay the loan effortlessly and enjoy bountiful profits.