Hard Money Loan

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DEFINITION of 'Hard Money Loan'

A loan of "last resort" or a short-term bridge loan. Hard money loans are backed by the value of the property, not by the credit worthiness of the borrower. Since the property itself is used as the only protection against default by the borrower, hard money loans have lower loan-to-value (LTV) ratios than traditional loans.

INVESTOPEDIA EXPLAINS 'Hard Money Loan'

Hard money loans carry interest rates even higher than traditional subprime loans. Since traditional lenders, such as banks, do not make hard money loans, hard loan lenders are sometimes private individuals that see value in this type of potentially risky venture. Hard money loans are used in turnaround situations, short-term financing, and by borrowers with poor credit but substantial equity in their property that wish to stave off foreclosure.

RELATED TERMS
  1. Credit Rating

    An assessment of the credit worthiness of a borrower in general ...
  2. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  3. Subprime Mortgage

    A type of mortgage that is normally made out to borrowers with ...
  4. Bridge Loan

    A short-term loan that is used until a person or company secures ...
  5. Loan-To-Value Ratio - LTV Ratio

    A lending risk assessment ratio that financial institutions and ...
  6. Turnaround

    The financial recovery of a company that has been performing ...
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