As a freelance writer who spends a ton of time doing research, I am routinely dismayed by the number of poorly written articles implying that hard money offers a quick way out of financial problems. It is as though anyone can apply for a loan and get approval in under 24 hours. Not only is it not that easy, but hard money lenders do not lend to anyone and everyone with a handout.
Hard money lending is a specific type of lending targeted at a distinct audience. The most important thing you could know is that lenders do not make personal or consumer loans. Hard money is not a retail service. It is not intended to help you buy a car, pay off your credit cards, or prevent the bank from seizing your house because you cannot pay your mortgage.
Hard Money Is for Commercial Purposes
The experts at Actium Partners, a Salt Lake City hard money firm with clients throughout Utah, explain that hard money is for commercial purposes. The vast majority of clients Actium works with rely on hard money to facilitate real estate transactions. Other hard money lenders work with house flippers, property developers, and companies looking to expand.
What do all these scenarios have in common? They represent commercial needs. They represent borrowers looking to meet commercial financial goals by way of a short-term loan that is likely to be paid off within 6-24 months.
The other thing they all have in common is the need for high value, high liquidity collateral. Hard money lenders do not look at credit scores and histories. They typically don’t ask for balance sheets and P&L statements. What they want to know is this: does the borrower have a piece of collateral capable of backing the loan. Does that collateral have a high enough value, and can it be sold quickly if necessary?
Not For Consumers With Money Problems
Hard money is not intended for consumers with money problems. If you were looking for a fast way out of a financial emergency, the fact that you had to borrow indicates that your financial resources are limited. This suggests that your assets might be limited as well. Why would a hard money lender go anywhere near you?
Even if hard money lenders lent to consumers, they would expect consumers to have a solid exit plan in place. An exit plan is a reasonable plan to pay off the loan when due. Real estate investors generally have a plan that involves selling other properties, getting a traditional loan, or even utilizing rent payments to meet their obligations. But a consumer suffering severe money problems would be hard pressed to come up with a reasonable exit plan.
How to Solve Those Money Problems
Hard money is not a quick way out of personal money problems. In fact, there is no quick way. It generally takes a person a long time to get in over their head. It is going to take just as much time to get out. In some cases, it might even take longer.
So how do you do it? Most people need to combine multiple strategies to solve their financial problems. Strategies include things like selling personal property, cutting expenses, and getting a second job.
If you’ve been led to believe that hard money offers a quick way out of financial problems, think again. Do not even waste your time looking into hard money. Instead, get your finances under control by changing your behavior. That is how you solve personal money problems.
