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Hard money loan
Also called private money loan, asset-based bridge loan.
Short-term financing underwritten primarily on the value of collateral rather than the borrower's cash flow or credit, usually secured by real estate and priced for speed and risk.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
The lender's question is not "can this borrower repay?" but "if they do not, what does the collateral fetch and how quickly can I get to it?" That inverts conventional underwriting and produces a distinct product: fast, expensive, short, and heavily dependent on loan-to-value.
Typical shape
- Secured by a first mortgage or deed of trust on real property, occasionally on equipment or other hard assets
- Term measured in months to a small number of years, frequently interest-only with a balloon at maturity
- Sized off the lender's own valuation, sometimes after-repair value in fix-and-flip lending, always with a substantial equity cushion
- Priced above bank rates, with points at origination, because the lender is buying speed and accepting recovery risk
- Funded by private capital, funds or individuals rather than deposits, which is why underwriting policy varies wildly between lenders
Where small businesses meet it
Owner-occupied commercial property purchases that cannot wait for an SBA timeline, a property acquisition with a short closing window, refinancing a maturing balloon, or bridging to a conventional takeout. It is a real estate product that businesses use, not a working capital product.
Where this one catches people
"Hard money" describes the underwriting basis, not the character of the lender — the term is not pejorative and does not imply anything about legitimacy. What it does imply is a maturity date that arrives fast and a lender comfortable foreclosing. Borrowers who take hard money assuming they will "refinance out" need the refinance to be underwritable at the time, not merely plausible; the exit is the whole risk of the product.
Where you will meet this term
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Hard money loan — common questions
What does hard money loan mean?
Short-term financing underwritten primarily on the value of collateral rather than the borrower's cash flow or credit, usually secured by real estate and priced for speed and risk.
Where does hard money loan catch people out?
"Hard money" describes the underwriting basis, not the character of the lender — the term is not pejorative and does not imply anything about legitimacy. What it does imply is a maturity date that arrives fast and a lender comfortable foreclosing. Borrowers who take hard money assuming they will "refinance out" need the refinance to be underwritable at the time, not merely plausible; the exit is the whole risk of the product.
Is hard money loan the same as an interest rate?
Hard money loan is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does hard money loan apply to?
Term Loan, Asset-Based Lending.
Is there a worked example of hard money loan?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside hard money loan?
Balloon payment, Bridge loan, Interest-only, Interim financing, Liquidation value.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.