Why Hard Money Loans are Better Than Traditional Loans During a Recession.

[Tyrell Proby]

During a recession, traditional lenders always become more risk-averse and reduce their lending activity. This makes it difficult for real estate investors to secure the financing they need to take advantage of investment opportunities. Hard money loans, however, can be a better option during a recession, refer to reasons below.

1. Flexibility: Hard money Lenders are able to make quick decisions about loans. This can be especially beneficial during a recession when time is of the essence and borrowers need to act quickly to secure financing.

2. Less stringent requirements: Hard money lenders (depending on who you work with) are typically less concerned with a borrower's credit score and financial history than traditional lenders, which can make it easier for borrowers to secure financing during a recession when credit markets may be tight. But, this does not mean that Credit doesn’t play a role at all. Generally speaking, one may have a tough time finding a HM lender to lend on their project if their credit score is far below avg.

3. Availability: During a recession, traditional lending sources may be more risk-averse and reduce their lending activity. Hard money lenders, on the other hand, may be more willing to lend in uncertain economic conditions.

4. Asset-based lending: HMLS secured by real estate, which means that the loan is backed by a tangible asset. This can make hmls less risky for lenders than unsecured loans, which can be especially important during a recession when the value of assets may be volatile.

Overall, hard money loans can be a valuable financing option during a recession in real estate when traditional lending sources may be limited. By working with a reputable hard money lender and carefully evaluating the terms of the loan, investors may be able to take advantage of investment opportunities even during uncertain economic times.