Hard money types of loans are most common exclusively in the United States and Canada, where the term “hard money” first originated.
Hard money loans originated in the commercial real estate field. The developers used these loans as a last resort to seek capital for their valued property. These hard money loans began in the late 1950s when the credit industry in the US was undergoing plenty of changes, and people were having a hard time getting any type of loan from the bank or government.
The hard money industry suffered severe setbacks during the real estate crashes of the early 1980s and early 1990s because lenders overestimated and funded properties well over their market value.
Ever since this time, lower Loan-To-Value rates have been used for hard money lenders trying to protect themselves against the markets.
The government has always unregulated the interest rates and loan structures of hard money loans. However, there are a few states that do keep regulations and tabs on their hard money lenders.
When hard money loans first came to be, the terms and conditions were generally held for only small periods of time. As the popularity of hard money lending grew, the length of the loans did as well, enabling people to loan for up to 5 years.
The same happened with the interest rates. They started out as low as 3%, and when the popularity grew, so did the desperateness of the hard money clients. The lenders began to realize just how much they could charge their clients, and they had but no other choice to accept these terms.
This alternative financing method grew and grew; its only downfall consisted of the real-estate crashes in the 1980s and 1990s, making the hard money lenders a bit uneasy about their current lending strategies. Hard money lenders were hard to locate then, as they are today.
Hard money lenders like their clients to find them, not the other way around. This shows their need for the loan to be that much stronger and necessary if they track down the hard money lender in their area.
Learning a bit about the history of this loan type can help you to see why it may be something for you. In addition, it gives you a perspective of what this type of loan is all about. Is a hard money loan right for your needs? Apply today!
Further Reading:
Investopedia – History of Money – Bartering to Bitcoin
Spectrum – A Brief History of Money