There’s a lot of misconceptions that surround hard money and soft money loans. Often, people don’t realize the distinguishing factor between these loans is their purpose.
To obtain a hard money loan from an investor, one must indicate a specific purpose. Soft money loans, on the other hand, are easier to procure as they don’t require a specified use.
These are just the basics. If you’re looking to acquire a loan or are interested in investing, you’re in the right place. Let’s discuss the differences between hard money vs soft money.
What is Hard Money?
Aptly named, hard money loans are more difficult to acquire than soft money loans. Their repayment terms are usually less favorable, as interest rates can be quite a bit higher.
Hard money loans are typically given out by private and group investors. These lenders require a form of collateral so their funds can be secured by real property.
Hard money loans are often a better option for real estate developers and home flippers. That’s due to the fact these people are able to provide a specific, profitable use for their loan.
What is Soft Money?
Soft money loans have lower interest rates than hard money loans and are easier to obtain. However, when comparing hard money vs soft money loans, don’t rule out the former just yet.
Although soft money loans still require a form of collateral, they also focus heavily on credit score. Your credit score must be above 580 to qualify. However, if you are in good standing, your interest rates could be even lower.
Another advantage to soft money loans is they’re not regulated by any governing body. The use of hard money loans, however, must adhere to certain state and national policies.
Hard Money vs. Soft Money- What’s Right for Me?
When deciding which route to take, you really have to consider what your loan is for. Are you looking to invest in or make a down payment on a property that you intend to live in? If so, soft money loans may be better for you.
Hard money loans are good options for those who want to buy investment properties that need to be fixed up. They’re also recommended for those with a recent foreclosure or bad credit, or for those who need to act quickly.
Even if a borrower cannot get conventional financing, they can still obtain a hard money loan. However, a lender would require sufficient equity.
Let’s Wrap This Up
There’s no clear-cut answer to the hard money vs soft money debate. But, hard money loans are advantageous when borrowers don’t meet the usual credit requirements.
At Realty Resources Corporation, we serve as a resource for a variety of asset-based financing. We can help you find hard money lenders, loans for bad credit, and more!
Since 1976, we’ve helped property buyers in Georgia qualify for fast funding. If this sounds good to you, reach out to us today. Contact us here or apply online!