Hard Money Loan

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Definition of 'Hard Money Loan'

A hard money loan is a type of loan that is typically used to finance real estate investments. Hard money loans are often used by real estate investors who do not have the time or the credit score to qualify for a traditional bank loan. Hard money loans are typically short-term loans, with terms of one to three years. The interest rates on hard money loans are typically higher than the interest rates on traditional bank loans. However, hard money loans are often easier to obtain than traditional bank loans.

Hard money loans are secured by the real estate property that is being purchased. This means that if the borrower defaults on the loan, the lender can foreclose on the property and sell it to recoup their losses. Because hard money loans are secured by real estate, they are considered to be a higher-risk investment for lenders. This is why hard money loans typically have higher interest rates than traditional bank loans.

Hard money loans can be a good option for real estate investors who need quick access to capital. However, it is important to be aware of the risks associated with hard money loans before you take one out.

Here are some of the pros and cons of hard money loans:

**Pros:**

* Hard money loans are typically easier to obtain than traditional bank loans.
* Hard money loans can be used to finance any type of real estate investment, including fix-and-flips, rental properties, and commercial properties.
* Hard money loans typically have shorter terms than traditional bank loans.
* The interest rates on hard money loans are typically higher than the interest rates on traditional bank loans.
* Hard money loans are secured by the real estate property that is being purchased.

**Cons:**

* Hard money loans are typically short-term loans.
* The interest rates on hard money loans are typically higher than the interest rates on traditional bank loans.
* Hard money loans are considered to be a higher-risk investment for lenders.
* Hard money loans may not be available in all areas.

If you are considering taking out a hard money loan, it is important to weigh the pros and cons carefully before you make a decision.

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