Hard Money Loan
A short-term, asset-based loan secured primarily by real estate rather than the borrower's credit or income. Funded fast by private lenders for acquisitions, rehabs, and bridges.
A hard money loan is short-term real estate financing secured primarily by the property itself — the "hard" asset — rather than by the borrower's credit score, income, or tax returns. Hard money is made by private lenders and funds, not banks, which is why it can close in days when a conventional loan would take weeks.
The trade-off is cost: because the loan is fast, flexible, and asset-based, it carries higher rates and points than bank financing. Investors accept that cost because speed and certainty win deals — and because the loan is only outstanding for a few months.
Defining characteristics
| Feature | Hard money | Conventional |
|---|---|---|
| Primary qualifier | The property | Borrower income & credit |
| Speed to close | Days | Weeks |
| Term | 6–24 months | 15–30 years |
| Rate | Higher | Lower |
| Payments | Usually interest-only | Amortizing |
| Funded by | Private lenders/funds | Banks |
What hard money is used for
- Flips — buy distressed, renovate, sell (fix-and-flip is hard money's biggest use case).
- Bridge — acquire or stabilize fast, then refinance into a DSCR loan.
- Auction & off-market deals — where a fast, cash-like close is required.
- Properties banks won't touch — heavy rehab, unusual condition, short timelines.
How lenders size a hard money loan
Hard money is sized off value, not income. Lenders typically lend 70–80% of as-is value on a straight purchase, or on a rehab deal a combination of loan-to-cost plus ARV caps. Because the property is the collateral, condition and exit strategy matter far more than the borrower's W-2.
When hard money makes sense
Use hard money when speed, flexibility, or property condition rule out a bank — and you have a clear, fast exit (sale or refinance) to pay it off. It's a tool for the active acquisition phase of a deal, not for long-term holds; for that, you refinance into permanent financing once the property is stabilized. To learn the full process, see our guide on how to get a hard money loan.
Frequently asked questions
What credit score do I need for a hard money loan?
Hard money is asset-based, so credit matters far less than with a bank loan. Many lenders have a minimum (often around 600–660) mostly to screen for serious title or fraud issues, but the property's value and your exit strategy carry the decision. Some lenders will fund with no minimum on strong-equity deals.
Why are hard money rates higher than bank rates?
Hard money loans are fast, flexible, short-term, and lend on assets banks often won't finance. That speed and risk are priced in. Because the loan is typically outstanding only a few months, the higher rate translates into a manageable dollar cost relative to the deal's profit.
How fast can a hard money loan close?
Often within 7–10 business days, and sometimes faster on clean, strong-equity deals. The main timeline drivers are the appraisal or valuation and clearing title — not income documentation.