You will often hear the terms “hard” or “soft” money connected to loans. There are some similarities, but there are also major differences. Let’s compare the two and see how they impact you as a borrower.
Hard money loans are used for property improvements, renovations, or as a bridge loan. A hard money loan is secured by the equity in the property. Loan terms are short with typical hard money loans lasting from a few months to a couple of years. Interest rates are higher than conventional loans because the investors are looking primarily at the property equity with less emphasis on the borrower’s credit acceptability.
Soft money loans share one aspect with hard money loans, as the equity in the property is offered as collateral. In the case of soft money, however, there is a greater emphasis on the credit value of the borrower, along with greater scrutiny of the borrower’s financials. The result is a loan with a lower interest rate in many cases but a longer repayment period. It is also likely that a soft money form will take longer to process, as the investor will spend more time looking at the financial aspects of the borrower.
One further advantage of a hard money loan is you can use it to improve a poor credit rating. If you successfully repay the loan you can report that fact to the credit bureaus which can be a positive factor in improving your credit position.
If you have less than perfect credit and are in need of money for property improvement, restoration, or are looking for a construction bridge loan, contact AHL Hard Money Loans. Our investors are looking for opportunities to help borrowers with their financial needs, so let us know how we can help.
