What are the Qualities Hard money lenders want in a Borrower?

    by Aditi Bansal

Updated on Thursday, May 18, 2017

Hard money lenders spend time assessing borrowers to ensure they meet a specific criteria; they look for specific qualities in borrowers as a security measure.

tags  #Hard Money Lenders  #Repay the loan #


Before you start approaching hard money lenders, you need to understand the qualities that will improve your chances of accessing the funds you need. You must research and identify the deals that may work in your favor, and the deals hard money lenders avoid, which will then help you prepare all the information they may need to approve your request.  

Here we look at the top three qualities hard money lenders pay attention to when processing loan requests:  

The Ability to Take Risks

Hard money lenders always look for big risk takers who will confidently invest their personal finances by making a significant down-payment before looking for additional funds from lenders. Such a move proves to the hard money lenders that you are invested in the project and you are also willing to lose if things fall apart. Once you understand this requirement, you are able to appreciate the lower loan-to-value ratio from hard money lenders, which differs greatly from the norm in conventional lending. The down-payment you make also gives the lender assurance and the equity needed should the property go into foreclosure. If you cannot raise the required amount on your own, you should consider finding an investor to help you raise the balance. Alternatively, you can make your contribution in labor either by covering the renovation process or by investing in the improvement process. Either way, you must be willing to make a commitment that shows you are also taking a financial risk.

Proof of Repayment Ability

Unlike bank lenders who use your credit score and previous banking history to assess your ability to repay a loan, hard money lenders tend to focus more on the estimated value of a distressed property after improvements or the potential of a property to generate a stable income. You also need to provide a long-term plan for the property as evidence that you plan on generating money from the investment.

Commitment to Repay the Loan

Hard money lenders also require you to present an exit strategy that gives them assurance that you can repay the money should even when the property fails to commercialize as per your original plan. Hard money lenders make money through loans, and they need assurance that they are not risking having their money tied to a single property for longer than is necessary. As a business strategy, it helps them ensure their business continuity.


Ideally, hard money lenders are looking for proof that you are committed to repaying their money so that they can keep it in circulation. Hard money lenders are business owners looking for a return on investment; they have no interest in owning properties they do not intend to manage. Additionally, they make more money by lending out money to other borrowers as opposed to having it tied down to a property.

This page has a focus on Hard Money Lenders, Repay the loan was shared by Aditi Bansal.

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