A hard money loan is a real estate loan which is secured by real property. Almost all the hard money loans are temporary loans of a year or less. There are important differences between a hard money loans and regular/conventional loans made by financial institutions, such as bank or protective funds. These types of loans are also called private money loans that are made by a private depositor, or a group of private depositors. The condition moneylender also differs in a hard money loan. Most financial institutions, who lend loans are based on their lending decision on the credentials of the borrower's ability to repay the loan. Hard money lenders mainly focus on the value of the property to decide whether to lend money and how much to lend. They will mainly use the property as security for the loan, which is very important for them. The lender must be at ease with the value of the property before deciding on how much to lend money to the borrower. Mostly, the hard money lender gives loans up to 70 percent of the property's current value, consulting their internal group of people dealing with this type of loan.

There are many advantages of hard money loans, like they are readily available when you are in real and urgent need for money, and often with other conventional loans taking time or rejecting applications. There is less paper work, thus it consumes less time. These types of loans help estate investors to take advantage of better deals before others grab this opportunity.

When you decide to take hard money loans, the next step is to apply for it. All you have to do is to just fill out a loan application form, which is similar to that of conventional loan forms. You have to provide all relevant information based on your financial situation, as well as on the property. Include all related data on the deal in your loan package. By giving the correct situation and information about your financial details, you will speed up the process.  It will make the process smoother in the future if you have a long term and good relationship with the loan lenders. Hard money loans may vary in fees and interest rates. So, shop around for your loan and compare with others to get the best deal.

As there are advantages, there are a couple of drawbacks to the average hard money loan. First of all, the rate of interest associated with these types of loans are higher than the bank loan that is comprehensive on the basis of a good credit history, which means that the borrower will have to pay more finance charges on the life of the loan term. Secondly, as the hard money loan is received from a private lender, there is not always the same quantity of consumer protection extended to the borrower.  

So, in spite of high rate of interest and long term of repaying the loan amount, hard money loans are the first choice of many borrowers.