What Is The Difference Between Hard Money Loan And A Traditional Loan?The Traditional Loan A traditional loan is a loan typically offered through a bank or credit union for a specific purpose, such as financing a vehicle purchase or paying for school tuition. The amount borrowed is selected by the borrower in the amount needed. The approval is based on several factors including the following criteria:
Credit score and credit history Income amount Owed Debts to other lenders Property if applicable as an asset in a secured loan Employment status and confirmation by lender (proof will be required) When these conditions are met and the borrower and loan amount are deemed an acceptable risk to the lender, a loan will be accepted. The interest rate, or APR, will vary depending on the type of loan and more importantly how the above information reflects on the borrower. Good credit combined with verifiable income and a low overall debt load will mean a low interest rate. The loan will be paid back as dictated by the loan contract from a few to several years with interest until the loan contract expires. A Hard Money Loan A hard money loan differs significantly from a traditional loan. First and foremost most banks and regular lending institutions will not make these types of loans. They are typically made by lenders who deal only in hard money or bridge loans. A hard money loan will be secured by piece of private property, most typically a home or second income, or vacation property. The amount of the loan will not exceed more than 65-75% of the assessed value. An interest rate on a hard money loan will typically be higher that of a traditional loan.
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