What happens if I default on a hard money loan?

When an individual defaults on a hard money loan, several consequences may ensue, reflecting the terms laid out in the loan agreement. Hard money loans, often secured by real estate, typically have shorter repayment periods and higher interest rates compared to traditional loans. In the event of default, the lender has specific rights and recourse options, primarily based on the collateral involved in the loan. First and foremost, the lender may initiate foreclosure proceedings on the property used as collateral. This process allows the lender to recover the loan amount by selling the property, as hard money loans are usually non-recourse, meaning the lender cannot pursue the borrower for additional funds beyond the collateral. However, the exact terms can vary, so it is essential to review the loan agreement closely for any unique stipulations. Additionally, a default can negatively impact the borrower’s credit score. While hard money lenders may not report to credit bureaus in the same manner as traditional lenders, any legal proceedings stemming from the default could be recorded and affect the borrower’s creditworthiness. Lastly, borrowers may also face additional financial ramifications, such as legal fees or costs associated with the foreclosure process. It is advisable to seek counsel or expert advice if one finds themselves in a challenging situation regarding a hard money loan. For more specific details or support, it might be helpful to look for contact information on the current California Hard Money Direct website.