If you’ve never used a private or hard money lender but have heard the terms, you may already have some perceptions about them. Some of them may not necessarily be correct. Real estate investors who have been in the business for any length of time have or will have used a hard money lender toPrivate money lending facilitate a transaction. Here are three things that simply aren’t true about hard money.

#1 Hard Money = Bad Credit  Hard money may be provided for those with poor credit but that’s not the qualifying criteria. Hard money lenders want to get paid back just as any other lender and foreclosing on a distressed property or one under renovation is a situation a hard money lender avoids. Borrowers with poor credit might be able to obtain a hard money loan but if successful can expect higher rates, more down payment and more fees. Some hard money lenders avoid borrowers with poor credit altogether.

#2 Hard Money = Loan Sharks  Hard money lenders are investors. They seek opportunities that provide higher yields in a shorter period of time. Most often, the properties financed are in such poor shape there is no market for them and a developer needs funds to renovate the property and prepare it for sale to the general public. There is greater risk on such projects for the lender and the rates and fees compensate for the additional risk.

#3 Hard Money = Hard to Close  Not true. The novice borrower might believe a hard money loan is easy to get because the lender is more concerned about initial down payment and can always foreclose if necessary. Hard money lenders do turn down more deals than they approve but that’s typically because the deal has no clear exit strategy. No exit strategy, no deal.