Hard money lender institutions are an integral part of modern society. Hard money lending businesses and individuals can secure financing for equipment, building repairs and other miscellaneous expenses at competitive interest rates. Individuals utilize these institutions for automobile financing, mortgages, home equity loans and more. Businesses use private lending to finance new equipment, new building construction, to boost operating capital and more. The economy could not function with the speed and efficiency it does without private money lending institutions.
Automobile financing is the most common way consumers utilize private lending institutions. New vehicles often cost upwards of twenty to thirty thousand dollars or more. Given that the median income in the United States is approximately $24,000 per year (approximately $45,000 per year for households), this puts automobile ownership out of the reach of most Americans if full cash payment was required up front. When private lending is utilized, a typical new auto loan for $25,000 might work out to a payment of about $500 per month (assuming 8% APR and 60 month term), an amount that is realistically affordable to many Americans.
Mortgages are another very common way for consumers to utilize private money lending. If automobiles are too expensive for the average American to purchase outright, the typical home also is. Home prices typically are measured in hundreds of thousands of dollars. Although it varies by region, average home prices in the United States range from approximately $140,000 in the Midwest to about $245,000 in the Northeast. It would be unrealistic to expect most Americans to save up this quantity of cash to purchase a home outright. Mortgages provided by private money lending institutions offer a long-term loan-usually 15 to 30 years-which makes home ownership possible for the general public.
Businesses frequently utilize commercial hard money lenders as well. Commercial real estate construction for buildings such as office parks, retail stores, warehouses and factories make up a large part of this market. Frequently businesses also require complex and expensive equipment that they cannot afford to purchase outright before beginning operations. Private money lending allows these businesses to set up shop, hire workers and expand when they would otherwise be unable to.
Business cash flow can often be unpredictable, yet firms have costs which are fixed and cannot be delayed, such as payroll, building rent and cost of materials. When business revenue temporarily declines to a point where the firm is unable to pay these costs, private money lending institutions can provide short term ‘bridge loans’ to allow the company to continue operations. This is a critical feature of private lending that stabilizes the economy, protects employment and allows businesses to hire more workers.
Without hard money lending institutions the economy would not be able to expand as fast nor operate as efficiently as it does. These institutions allow consumers to buy goods they otherwise could not and allow businesses the freedom to expand operations and increase employment. These effects benefit the entire economy and the nation as a whole.
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