What Is a Hard Money Loan?

A hard money loan can be a great alternative source of funding for a number of different projects. Many people are unfamiliar with hard money loans, even though they present borrowers with a viable option for financing. Here are the basics of a hard money loan and how they work.

Hard Money Loans

A hard money loan is a loan that is offered by a private investor. A hard money loan does not conform to the same standards or requirements that come with a traditional loan.

The lending decision usually comes a little bit faster than with a traditional loan because the decision is usually made by one individual. They do not have multiple layers for the loan application to pass through.

Loan Terms

Hard money loans are usually designed to be short-term in nature. They usually also have flexible terms that allow you to pay only interest on the loan. For example, you might have a two-year balloon loan with a hard money loan. This gives you two years of interest-only payments, followed by a balloon payment.

Interest rates of hard money loans are also quite a bit higher than what you could get from a normal lender. Therefore, this type of loan should usually be your last option to consider.