SBR Network
  • Home
  • About SBR
  • Topics
    • Business & Markets
    • Economy
    • Education
    • Entertainment
    • Finance
    • Food & Drinks
    • Healthcare
    • Home
    • News
    • Sports
    • Technology
  • Contact SBR
  • Pages
    • Team Info
    • Privacy Policy
    • Editorial Policy
    • Cookie Policy
No Result
View All Result
SBR Network
  • Home
  • About SBR
  • Topics
    • Business & Markets
    • Economy
    • Education
    • Entertainment
    • Finance
    • Food & Drinks
    • Healthcare
    • Home
    • News
    • Sports
    • Technology
  • Contact SBR
  • Pages
    • Team Info
    • Privacy Policy
    • Editorial Policy
    • Cookie Policy
No Result
View All Result
SBR Network
No Result
View All Result

Why You Don’t Want to Default on a Hard Money Loan

Nicole Haley by Nicole Haley
3 years ago
in Finance
0
Why You Don’t Want to Default on a Hard Money Loan
403
SHARES
2.4k
VIEWS
Share on FacebookShare on Twitter

Businesses and individuals alike turn to hard money when traditional bank lending is either impossible or just doesn’t meet certain needs. For example, a house flipper might use hard money to acquire new properties. The last thing any hard money borrower wants to do, regardless of the reasons for borrowing, is default.

Default is defined in the financial services world as failing to make agreed payments. If you miss just a single mortgage payment on your home, you are technically in default. The thing about defaulting on a hard money loan is that the consequences of doing so can be more severe compared to defaulting on a bank loan.

Hard Assets as Collateral

The most fundamental difference between traditional lending and hard money is how collateral is treated. Hard money lenders require hard assets as collateral. Usually, collateral is offered in the form of real property. It acts as security on the loan. It also gives hard money lenders a tangible asset through which they can recover their money if necessary.

Collateral also plays a role in traditional bank lending. However, the differences between hard money and traditional lending can be quite stark when a borrower defaults.

Default Rate Clauses

It is fairly routine for hard money lenders to include default rate clauses in their loan contracts. A default rate clause is a clause that states that the interest rate on a loan will increase automatically on default. Let us say you have a lender who loans at 15% with a default rate of 30%. Missing just one payment could increase the borrower’s monthly payment from $1,200 to nearly $2,500.

Default rate clauses can make loan affordability impossible after just one missed payment. In addition, some of these clauses give borrowers only a short window of time to bring their loans current. If they fail to do so, lenders are ready to move forward with other means of remedy.

Foreclosing on Collateral

Unlike banks and credit unions, private lenders lend their own money. Thus, they cannot afford to be as flexible when a loan goes into default. Failing to bring a default loan current gives lenders all the reason they need to proceed to foreclosure.

According to Actium Partners in Salt Lake City, Utah, hard money lenders generally have two options when defaulted loans are not made current: foreclosing or issuing a deed in lieu of foreclosure.

Foreclosing is pretty straightforward. The lender exercises its lien authority to reprocess the property and sell it. Any revenues generated from the sale will go to paying off the loan. In some cases, the lender gives the difference back to the borrower. In other cases, the borrower forfeits everything, thus losing whatever was paid into the loan.

Borrowers can ask lenders to offer a deed in lieu of foreclosure instead. Why do so? Because it prevents an official foreclosure that would go on the borrower’s credit history and potentially create more problems.

A deed in lieu of foreclosure essentially transfers ownership of the property to the lender. In such a case, it is imperative that the borrower also obtain a release of lien from the lender. Otherwise, the borrower is still legally obligated to repay any remaining balance on the loan.

As you can see, defaulting on a hard money loan is serious business. Defaulting is a big deal on any form of credit, but hard money lenders do not have the luxury of being so flexible. They must move quickly to protect themselves in the event of default. More often than not, they do.

Previous Post

How are CSPO and CSM different?

Next Post

Three Dangerous Labor Complications

Nicole Haley

Nicole Haley

Next Post
Three Dangerous Labor Complications

Three Dangerous Labor Complications

  • All
  • Education
Reputation Poll International’s 2023 List of 100 Most Reputable Africans Adds Distinguished Lawyer NJ Ayuk 
Law

Reputation Poll International’s 2023 List of 100 Most Reputable Africans Adds Distinguished Lawyer NJ Ayuk 

by Nicole Haley
March 2, 2023
0

NJ Ayuk has been sitting at the head of Africa’s energy table for quite some time now, and remains one...

Read more
Your Guide to Online Doctor’s Notes

Your Guide to Online Doctor’s Notes

February 17, 2023
You Will Never Believe These Bizarre Truths Behind Accident Attorneys

You Will Never Believe These Bizarre Truths Behind Accident Attorneys

January 27, 2023
What Makes Blood Vessels Grow?

What Makes Blood Vessels Grow?

January 24, 2023
SEO: What Is It and How Does It Work?

SEO: What Is It and How Does It Work?

January 6, 2023

Recent Posts

  • Reputation Poll International’s 2023 List of 100 Most Reputable Africans Adds Distinguished Lawyer NJ Ayuk  March 1, 2023
  • Your Guide to Online Doctor’s Notes February 17, 2023
  • You Will Never Believe These Bizarre Truths Behind Accident Attorneys January 27, 2023
  • What Makes Blood Vessels Grow? January 24, 2023
  • SEO: What Is It and How Does It Work? January 6, 2023
  • 2022’s Best Batsmen and Bowlers: Who Will Come Out on Top? December 30, 2022
  • Easy Ways To Up Your Game While Betting On Cricket Online December 30, 2022
  • How To Win More Money Horse Racing: Tips To Optimize Your Odds December 16, 2022

Archives

  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
March 2023
M T W T F S S
 12345
6789101112
13141516171819
20212223242526
2728293031  
« Feb    
Your Guide to Online Doctor’s Notes
Healthcare

Your Guide to Online Doctor’s Notes

An online doctor's note is a document obtained by a patient through a virtual medical consultation. It verifies their medical ...

February 17, 2023
What Makes Blood Vessels Grow?
Healthcare

What Makes Blood Vessels Grow?

Blood vessel growth is essential for fast and effective wound healing. The more blood vessels, the quicker new tissue can ...

January 24, 2023
10 Ways to Protect Your Mental Health at Work
Healthcare

10 Ways to Protect Your Mental Health at Work

No matter what you do for a living, work impacts the state of your mental health — for better or ...

June 11, 2022
Is Your Vape Juice The Right One For You?
Healthcare

Is Your Vape Juice The Right One For You?

Are you a vaper who switches their current vape flavour as often as possible, or have you found a tasty ...

April 13, 2022
Perception towards Online Movie Watching Has Been Changed
Entertainment

Perception towards Online Movie Watching Has Been Changed

Online films are a kind of video made explicitly to be watched on the web, for the most part on ...

February 25, 2022

Categories

  • Business & Markets
  • Economy
  • Education
  • Entertainment
  • Finance
  • Food & Drinks
  • Gambling
  • Healthcare
  • Home
  • Insurance
  • Law
  • Life
  • News
  • SEO
  • Sports
  • Technology
  • Travel
  • Wine

Recent News

Reputation Poll International’s 2023 List of 100 Most Reputable Africans Adds Distinguished Lawyer NJ Ayuk 

Reputation Poll International’s 2023 List of 100 Most Reputable Africans Adds Distinguished Lawyer NJ Ayuk 

March 2, 2023
Your Guide to Online Doctor’s Notes

Your Guide to Online Doctor’s Notes

February 17, 2023
  • About
  • Our Team
  • Advertise
  • Privacy Policy
  • Get In Touch

@ 2022 SBR Network.

No Result
View All Result
  • About SBR Network News
  • Contacting SBR Network
  • Cookie Policy
  • Editorial Policy
  • Get In Touch
  • Home
  • Home
  • Privacy Policy
  • Team Info

@ 2022 SBR Network.