What Is a Hard Money Loan?
A hard money loan is a short-term, asset-based loan funded by private lenders or funds rather than banks. Approval is based primarily on the property (collateral value) rather than the borrower's income, employment, or credit history. Hard money loans close fast — typically 5-14 days — because underwriting focuses on the deal, not the borrower's financial profile.
Terms are short (6-24 months), rates are higher (9-15%), and points are charged upfront (1-4 points). The trade-off for the higher cost is speed, certainty of execution, and flexible qualification. Hard money is a tool, not a destination — most investors use it to acquire, then refinance into permanent financing.
When hard money makes sense: Auction purchases, time-sensitive deals, properties that need work before they qualify for conventional financing, borrowers with credit issues who need to close now. The cost is higher, but losing a deal because your bank took 45 days costs more.
Who Hard Money Loans Are For
- Fix-and-flip investors who need fast acquisition capital
- Auction buyers who need to close in days, not weeks
- Investors with credit issues who cannot qualify for conventional loans right now
- Bridge borrowers who need short-term financing while arranging permanent debt
Key Features
Close in 5-14 days. Terms from 6-24 months. Interest rates from 9-15%. Points from 1-4 upfront. LTV up to 65-75% of ARV or 80-90% of purchase price. Minimal income verification. Credit scores as low as 550 accepted by some lenders.