Pros And Cons About Hard Money Loans

Hard money loans are not for everyone, but there are many benefits that should be considered when looking for funding for a project. If you are unsure if a hard money loan is the right option for you, here are the pros and cons to consider. 


If you are looking for fast funding of your project, a hard money loan is a good option. The application period is typically shorter than a more traditional loan. If you are under a time crunch to finish a project, then this loan can help you do this. 

Another benefit is that hard money lenders are willing to accept various types of collateral. Assets, such as a car, home, and boat can be used to secure your loan. By contrast, a more traditional lender might not be as willing to accept such items for collateral. 

The credit requirements for a hard money loan are usually less stringent, which means that you have a better chance of getting approved than with a traditional lender. This could be good news if you have less than perfect credit. Since collateral is used to secure the loans, lenders tend to ease up more on applicants. 


One of the biggest disadvantages of having a hard money loan is that it is usually short term. If you are not going to be able to pay the loan back in a short period of time, you run the risk of losing the asset that you put up for collateral. 

Hard money loans tend to have higher interest rates than traditional loans. However, with careful planning and money management, you can pay back your loan in a reasonable time and avoid late fees and other fees that could add to the final total of your loan. 

Hard money loans are typically used to help finance ventures, such as flipping houses. If that is your intention, you could run into a problem when applying for a loan. Part of the application process is showing just how profitable your project can be. If you are unable to show that your project can turn a profit, then you could be denied. 

The final decision of whether or not a hard money loan is a good idea for your project rests with you. Before making your final decision though, consider talking to hard money lenders about any concerns that you may have so that you can make a clear and informed decision.