If there is one thing every potential borrower should know about hard money, it’s this: lenders require collateral with enough value to back the loan in question. Collateral is everything in the hard money game. Here is something else you might not know: it is possible to borrow multiple times using the same collateral.
Actium Lending is a Salt Lake City, UT hard money lender unafraid to lend against the same collateral multiple times. As long as that collateral is real estate, and the property has enough value, Actium can find a way to work with it.
Other forms of collateral may not offer the same kind of flexibility borrowers get with real estate. Perhaps that’s why real estate is considered the best type of asset for securing hard money and bridge loans. Lenders appreciate real estate. It is what their business thrives on.
The Basics of How It Works
One of the things I most appreciate about hard money is how simple it is. Anyone can understand the basics without a formal education in finance. Unfortunately, the same cannot be said about traditional lending.
Most hard money loans cover real estate investments, so we will use such a scenario to explain how it all works. Imagine a fictional investor named John Smith. He approaches Actium Lending and hopes of obtaining a loan to buy an investment property in Salt Lake City.
Smith has borrowed from Actium before. He completes his application and gathers his documents, then submits everything to Actium. In his documentation there is information on a piece of collateral he has offered in the past. It is completely separate from the new piece of property he is hoping to obtain.
Actium has already worked with this collateral. They already know its relative worth. They know it offers enough value to cover Smith’s most recent loan request. As such, the loan is approved fairly quickly.
Borrowing With a New Piece of Collateral
The main benefit of offering the same piece of collateral multiple times should be obvious: it streamlines the approval and funding process. Borrowing with a new piece of collateral makes the process more complicated – but not by much.
The new piece of collateral will have to be assessed to determine its value. Then the lender needs to look at it in light of everything else associated with the loan application. It is certainly not a big deal in the grand scheme of things, but offering a new piece of collateral just adds another step to the process.
Still Faster Than Traditional Lending
Whether a borrower uses the same piece of collateral multiple times or offers new collateral on every loan application, the fact remains that hard money lending is still a lot faster than its traditional counterpart. It takes very little time for a hard money lender to assess the value of the collateral being offered. At the same time, the lender is not compelled to look under every stone and around every corner to determine the borrower’s financial position.
If you use hard money on a regular basis and you have a couple of properties you can use as collateral for all your loans, ask your lender if they will lend on the same piece of collateral. If so, the lending process becomes even simpler. If not, you always have new collateral to work with.
One way or the other, loan approval will be based on the value of your collateral. That is how hard money works. If the value is there, most hard money loans will find their way to approval.
