An Overview of Hard Money Loans and What They’re Used For

There are a number of loans available in everyday life. These include student loans, business loans, auto loans, and construction loans, just to name a few. One type of loan that can be obtained is known as a hard money loan. Unlike some loans, which are based on credit, hard money loans are based on property assets; the name of the loan is based on a term coined in the 1950s. Hard money loans are a type of private loan that are often obtained when someone wishes to fix and “flip” a property. This article will provide a basic overview of hard money loans and what they’re used for.

  • Hard Money Loans are Secured by Real Estate: As mentioned earlier, hard money loans are secured by real estate instead of any other form of credit. What this means is, real estate is placed as collateral in return for receiving a loan. While this allows for a loan to be secured relatively quickly, it also means your real estate is at risk of being taken as payment if the loan is not paid back on time.
  • Hard Money Loans Can Be Obtained from Several Sources: Unlike some loans, which can only be obtained from the bank, hard money loans are private loans that come from private money lenders or hard money lenders. The most common sources of money for hard money loans are friends and family, personal and professional acquaintances, and professional hard money lenders, who work solely to provide money for these types of loans.
  • Hard Money Loans are Often Used for Building Projects: Hard money loans can be secured from hard money lenders for several reasons, but one of the most common reasons to secure this type of loan is if you’re working on fixing up and “flipping” a property. This refers to buying a property, renovating it, and then turning around and selling it in short order to make a profit. Since flipping is generally done quickly, hard money loans are an ideal way to finance this kind of project.

In conclusion, hard money loans are secured by real estate and can be obtained form a number of private sources, including family friends, personal acquaintances, and professional hard money lenders. Frequently, hard money loans are used to finance house flipping projects.

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