Need a layman's guide to the ins and outs of hard money loans? We'll give the details on hard money lenders and appropriate use of these loans for real estate investing. Continue reading for the negatives and positives of the use of hard money for investment purposes.

Hard money loans are considered high risk and you are dealing with investors who want a high return on their money. That means your interest rates will be very high and a hard money loan will be a very expensive way to borrow money.

Hard money lenders, unlike the big institutional lenders, charge high interest rates usually above the market rates as they are experienced investors looking for good returns. These hard money lenders, usually charge 5 to 10 percentage points higher interest rates than the private money or conventional lenders. Hard money lenders also charge 'points' (or pre-paid interest) on the loans, which makes them a rather costly option when borrowing money.

So, on the plus side, hard money loans are generally worth approximately 65-70% of the after repair value (ARV) of the property in question. This is beneficial because it allows you to obtain the necessary cash to finance renovation costs as well as the purchase price. This means you can potentially get into a deal with little to no money down if the after repair value to cost ratio is high enough.

If you are trying to fund real estate investments and have poor credit, hard money loans are a viable option. Hard money lenders take the security of the loan into consideration and do not consider character or loan serviceability. For those who are on a strict time limit, hard money loans are also attractive since there is little to no wait time for approval.

Hard money lenders could be found in the "money to lend" section of your local newspaper most often. Next would be at a gathering of your local housing investing association. Local hard money lenders will attend every now and then to solicit new business. Also, you can find them on the net by searching for keywords like "hard money lender" or "hand money loans".

Here's a layman's guide to borrowing hard money loans. Third-party lenders who charge interest rates higher than the prevalent market rates for lending are called hard money lenders. The interest rates charged by them are typically 5-10 percentage points higher than the conventional lenders. They are beneficial because they allow you to obtain the necessary cash flow to finance renovation costs which may lie in your future. They are also notorious for charging "points" on a loan which is essentially a pre-paid interest on loan. They will often attend to solicit new business. Finally, don't forget to check online - just search for "hard money lending".