As a real estate investor, it’s really important for you to understand this. Firstly, unsecured loans are going to be loans where the collateral doesn’t have any security. Typically, there’s a promissory note.
When we talk about real estate investing, you have a note and a trust deed or a note and a mortgage. The difference between these types of things is that a promissory note is just a promise to pay. A promissory note that isn’t tied to something is called an unsecured loan. It means that it isn’t tied to any type of collateral.
Now the collateral could be a car, a house or equipment or just about anything. But what you’re going to have is a promissory note and something that ties it to a security. A promissory note with a trust deed or a promissory note with a mortgage or a promissory note with UCC financing or a promissory note with a stock certificate that you take as a collateral.
When it comes to unsecured loans, it’s a loan where there is a promissory note. It’s also called the signature loan. You are signing the note with the promise that you will pay back the money to the lender. But it does not come with any attached collateral for the lender.
Unsecured loans can be very helpful to you when it comes to real estate investing. There are places where you can get an unsecured loan or a promissory loan. These loans are huge (about five – twenty thousand dollars) and that can help you out as a real estate investor when you are doing a fix up or a remodel.
As you know, hard money lenders are secured because they are lending against the property i.e. property as the collateral. But it may be helpful for you to have some type of an unsecured loan so you can pay for different type of expenses along with the ability to get secured financing.
Unsecured loans have only one collateral – your good name and your good will. The money is given to you by trust, your credit score rating and your track history. It’s not tied to any type of collateral which won’t solve all the funding needs that you have as a real estate investor. But it might help you when you are trying to get started.