Hard money loans are short-term loans secured by collateral - usually real estate - and offered by private investors instead of traditional banks. Loan approvals and amounts are based on the property value instead of borrower income, credit score, or debt-to-income (DTI) ratio. Hard money loans are well-suited for developers and investors who need short-term financing for deals that do not qualify for traditional bank loans, or simply need to act quickly.

Hard money loan interest rates and fees are higher than traditional bank loans because they carry higher risk. Hard money lenders usually require a first lien position on the property/collateral used to secure the loan, and the property cannot be claimed as a homestead.

These requirements allow hard money lenders to operate with less regulatory overhead and can thus close deals in fraction of the time of traditional banks. Due to the lack of regulation, however, borrowers need to choose their hard money lender carefully, and make sure they understand all the terms and conditions before securing a loan.