Hard money loans are a type of financing that is secured by the value of the borrowers real estate. These types of loans are privately funded and almost never funded by a traditional bank.
Because hard money loans are secured by real estate you can obtain a loan even if you have bad credit. The borrower hardly ever has to use credit to secure a hard money loan.
Hard money loans usually have a high interest rate. They are used mostly for short term financing. Interest rates on hard money can be much higher than traditional loans. This is due to the risk involved with a private money loan.
The name "hard money" is sometimes thought to be because of the difficulty of obtaining this type of loan. But, it is actually much easier to obtain a hard money loan because it required less qualification and paperwork. Because the loan is secured against real estate, the private lender does not need your credit to make the deal work.
Hard money loans are not regulated like traditional bank funding. This allows for faster funding and is attractive to property flippers and rehabbers.
Commercial hard money loans are often called "bridge loans". They are higher risk than a traditional hard money loans and often require a down payment.
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