The internet is a wonderful thing. You can learn all sorts of things from it. But as you know, you cannot always believe everything you read online. That’s why we say, if you really want to know how hard money works, ask a lender. Do not take what anyone else says as gospel. There is a lot of misinformation out there.

Lenders Do Things Differently

This post was partly motivated by a discussion we ran across on a popular internet forum. The original poster asked other forum members to educate him about hard money as someone who was completely new to the concept.

He mostly wanted to know how hard money works for real estate investments. He posed a scenario that could be played out as either a flip or a hold/rental. Then he asked for everyone else’s opinions.

Interestingly enough, his second response came from an actual hard money lender who explained how he and his firm do business. It was followed up by nearly a dozen other responses from people we assume were not lenders. They all had different experiences. Therein lies the rub. Hard money lenders do things differently. There is no static formula that we all follow.

Lending for Different Needs

One of the biggest differences among hard money lenders is the types of projects for which we will lend. We are pretty specific here at Actium Partners. We only make real estate loans. We do not make owner-occupied real estate or construction loans. Other hard money lenders do.

Why mention this? Because assuming that you cannot get hard money for your project because someone on an internet forum was turned down by a single lender makes no sense. Look around. There are so many opportunities for hard money and bridge loans that you’re bound to find a lender that meets your needs.

Rates, Points, and Fees

Another way in which hard money lenders differ is the actual cost of borrowing. Hard money lenders set their own rates. They determine their own points and fees completely independent of what banks or the Fed do. So of course you’ll get different numbers from different lenders.

Even terms might be different. A typical hard money lender wants to keep terms at 24 months or less. Furthermore, each loan is structured according to circumstances and needs. Terms could be as low as 6 months in some cases.

What We Have in Common

Despite so many differences among private lenders, there are some things we have in common. Whether you are looking for hard money for real estate or some other purpose, the chances are pretty good that your lender:

• will be more interested in collateral than your credit score
• will have your collateral appraised before making a decision
• will be able to approve and fund your loan much faster than any bank
• will offer you a streamlined application process with little paperwork.

The best way to close this post is to explain that hard money lending isn’t a one-size-fits-all kind of thing. That’s one of the reasons why it’s a leading form of alternative funding – especially for real estate investments. If you’ve been thinking of applying for hard money or bridge loans for real estate, get your information directly from a lender. Internet discussions can be entertaining, but you cannot always believe what you read online. You can believe what a lender tells you directly.