What is a Hard Money Loan?

What is a Hard Money Loan?

A hard money loan is a form of non-traditional financing where the asset being purchased by that loan is put down as the collateral. Usually, even with a bad credit score, you can still qualify for a hard money loan because the lenders are forgiving. A lot of people turn to this type of loan as a quick financing option while they wait to secure a traditional loan. Hard money loans are often used in the real estate industry. For instance, qualifying for a traditional loan to flip a property is not always easy. But with hard money loans, you can access the money you need, buy a home, fix it and sell it at a profit.

How Does a Hard Money Loan Work?

A hard money loan allows you to borrow capital without using conventional mortgage lenders. Funds come from investors or individuals that lend you money and use the property as collateral. These lenders will check whether you have a good credit score and any other income to determine your creditworthiness.

If anything goes wrong and you cannot repay a hard money loan, the lenders will get their money back by selling the property you had used as collateral. Hard money loans are also short-term, lasting anything between 1 to 3 years. You should consider them if you want quick cash for a purchase. However, these loans tend to have high-interest rates, which can at times be a discouraging factor.

Should I Take a Hard Money Loan?

If you have not had much luck getting a conventional loan for a real estate purchase, then consider a hard money loan. Qualifying for the loan is not difficult. A hard money lender will not spend a lot of time scrutinizing your application like a traditional lender.

Is a Hard Money Loan Worth It?

While a hard money loan has some advantages, it also has a few drawbacks. For instance, the interest rates are usually high, and you may have to pay some closing fees before getting your funding.

You will need funding at one point if you are in the real estate business. If you are at that point, contact Quick Capital Funds. We can get alternative financing to borrowers in need of quick funding. Reach out, and our team will be happy to help.


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