While subprime and hard money loans are both alternative financing solutions, they differ in a variety of ways. Both options are ideal funding solutions for borrowers who are unable to obtain credit from a traditional lending source, such as a bank or credit union, but that’s typically where their similarities end. Read on to understand the differences between subprime and hard money loans.
Subprime loans are offered to customers with higher interest rates compared to conventional loan programs. Those with unconventional proof of income, less-than-perfect credit, an inability to prove liquid cash reserves, or difficulty maintaining a usual repayment schedule can benefit from a subprime loan. A borrower may be in the position to apply for a subprime loan to do unemployment, divorce, or a medical emergency. A lender may offer a fixed or adjustable interest rate, and the interest rate will depend on the specific situation of each individual borrower.
Hard Money Loans
Hard money lenders typically lend to those who are even unable to qualify for a subprime loan. For instance, the borrower may be at risk for foreclosure, have issues with home vale and seasoning or possibly are working with a gift of equity or a non-traditional for of down payment. The loans are mainly based on the property’s equity. Due to the higher risk, hard money lenders charge higher interest rates than traditional lenders, but the term of the loan is usually shorter with lengths varying from 6 months to 60 months.
To learn more about subprime and hard money loans, contact Athas Capital Group. Athas is a leading alternative lender that provides structured and transparent lending programs to meet the unique needs of borrowers, investors, and brokers in the real estate industry. Learn more at www.athascapital.com.