Hard money is a term used to describe a short-term real estate loan from a private lender. A private lender focuses on the collateral used for the loan, rather than the credit worthiness of the borrower or the borrower’s ability to repay the loan.
For example, when applying for a hard money loan, the lender would focus on the equity in your property, ensuring that you have enough “skin in the game” and be less likely to default on the loan.
How Does it Work?
Hard money loans have less requirements such as credit scores and debt-to-income ratio, but tougher requirements on the collateral.
Hard money lenders focus on the property or asset itself. If you default on the loan, they’ll take possession of the property and sell it to make up for the money lost on the defaulted loan. Hard money loans often have interest rates higher than traditional loans, but the terms are much shorter.
While you may pay a higher interest rate for a hard money loan, the amount of interest paid over the life of a short-term hard money loan is substantially less than a traditional mortgage, which can last up to 30 years.
Advantages vs. Disadvantages
Understanding the advantages and disadvantages of a hard money loan can help you decide if it’s right for you.
- Flexible guidelines – Traditional lenders have specific and rigid guidelines they must follow, leaving little leeway for borrowers with unique situations, but hard money loans have much more flexible lending guidelines.
- Credit scores don’t hold you back – Most hard money lenders don’t use credit scores as a deciding factor in your loan submission.
- Fast approvals – Since hard money loans rely mostly on the collateral of the property, they close much faster, allowing you to act quickly on a purchase or refinance.
- Higher rates – Convenience and flexible guidelines come at a cost. You’ll pay higher interest rates on hard money loans, but most borrowers keep them for only a year or two.
- Fees – Most hard money loans have upfront fees and closing costs (origination fees), but many mortgage loans do too. Work the fees into your numbers to make sure the investment makes sense.
Should you Use a Hard Money Loan?
Now that you’ve learned some of the nuances of hard money, it may be time to determine if it’s right for you.
If you’re in the market to purchase or refinance an investment property quickly, with few qualification requirements, a hard money loan could be a strong investment tool. For more information, please visit or call 619-872-6000 to speak with a Wilshire Quinn loan representative today.
- Funding typically in 5-7 business days
Loan Amounts from $200,000 to $20,000,000
- Interest Rates from 8% to 10.5%
Loan Term: 3 – 24 months
Commercial & Residential (non-owner occupied) Real Estate
- Purchase, Refinance, Cash-out Refinance, Rehab, Blanket Loans
Foreign National Loans Available
About Wilshire Quinn
Wilshire Quinn is a San Diego hard money lender focused on short term bridge loans, secured by first trust deeds. The company is based in San Diego, CA with offices in Los Angeles and San Francisco. Wilshire Quinn typically funds loans for their customers in 5-7 days. Their successful track record is closely linked to their ability to make immediate lending decisions based on their highly disciplined underwriting approach. The company funds a variety of loans such as: refinance, purchase, blanket, rehab loans, 1031 exchange, partnership buyouts, and more. They originate hard money loans ranging from $200,000 – $20,000,000. Wilshire Quinn works with commercial and residential buyers nationwide.
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