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2 Technologies That Could Revolutionize Hard Money Lending

We live at a time in history when technology impacts nearly everything we do. And as technology advances, how we use it opens the door to incredible possibilities. I was recently reminded of that while doing some research into hard money lending. I ended up looking at two particular technologies poised to completely revolutionize the hard money industry.

Those two technologies are artificial intelligence (AI) and blockchain. Neither technology is new. However, AI is all the rage thanks to ChatGPT and other large language models (LLMs) capable of doing incredible things in the generative environment. As for blockchain, it has been around since the introduction of bitcoin decades ago.

The question for this post is how both technologies will impact hard money lending in the future. Let us explore some of the possibilities, shall we?

AI in Hard Money Lending

Although hard money lending has joined the digital revolution, most lenders are not taking full advantage of all the technologies available to them. AI is one such technology. Slowly but surely though, things are changing.

Actium Partners is a hard money lender based in Salt Lake City, UT. Although the company has been known to fund loans in as little as one business day, their underwriting process is still very much a manual exercise. AI could change that through automation. An AI-driven underwriting process would be faster, more efficient, and less prone to error.

AI for Risk Mitigation

Another exciting opportunity for AI in the hard money industry is better risk mitigation. If nothing else, AI tools are very good at predictive analytics. They can crunch vast amounts of historical data, compare it to current conditions and future expectations, and accurately project risk in both the short and long terms.

AI-driven risk mitigation could include tools for evaluating borrowers. It could be utilized for automating property appraisals and helping lenders diversify their portfolios. The possibilities are vast and wide open.

Blockchain in Hard Money Lending

Blockchain technology is already being introduced to the lending industry. In the hard money game, its biggest advantage is found in smart contracts. A smart contract is a self-executing digital contract created and executed on a blockchain network. It is ideal for hard money because:

  • Terms and conditions are encoded in the contract.
  • Smart contracts can be executed automatically, eliminating the need for lender intervention.
  • Funds can be automatically dispersed through the contract.
  • Borrower payments can also be automatically executed over the network.
  • Certain actions taken in the event of delinquency can be automated.

Smart contracts take a lot of the tedious busy work out of lending. Hard money lenders can put up the funding as normal. They can make initial contact with borrowers to discuss loan products and possibilities. But then, beginning with the borrower’s application, everything else can be turned over to a smart contract for execution.

Smart Contracts Are Immutable

One of the big benefits of blockchain technology is the built-in immutability. All smart contracts, be they loan contracts or agreements to buy/sell cryptocurrency are immutable. They cannot be deleted or modified once entered into the blockchain. Likewise for actual financial transactions. That makes for better security and an exponentially lower likelihood of errors.

Hard money lending will have to change with the times to keep up. As the industry does, expect to see more lenders embrace technologies like AI and blockchain-based smart contracts. Tomorrow’s hard money industry may look drastically different depending on how quickly these new technologies are adopted. But rest assured they are coming. It is only a question of how long it takes.

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