When you are investing in real estate, acquiring the necessary funding can be difficult. One way that many professionals deal with this is to take out a hard money loan. This is a short-term loan that acts as an alternative funding method to obtaining a mortgage. However, there are advantages and disadvantages to using hard money.


The advantages include speed, flexibility, and approval. To get a hard money loan, you are required to put up collateral. For this reason, you can generally get a hard money loan much quicker than any other type of loan. You are seen as low risk to the lender because the collateral is sold in the event you can’t pay them back. 

You will also find that you have more flexibility when it comes to how you use money from the loan. In some cases, you can set your own schedule for repayment, something other loan types don’t offer. Add this to the fact that it is generally easy to get approved for this type of loan, and you will be well on your way to having the money you need. 

When To Use One

A hard money loan is most often used when you need financing to flip houses. Yet it can be used to purchase a house you intend to live in. Most people that start with a hard money loan renegotiate the deal once they’ve bought the house. 


The main disadvantage of taking a hard money loan is that you will pay higher interest rates on it than you would on other types of loans. The lender may require you to cover the closing costs of the house you are buying, even if you intend to fix it up and sell it. Another disadvantage is, because it is a short term loan, it can drain your finances in the long run. Generally, the higher the value of the property you are buying, the more money the loan is going to cost you. 

For more information on the advantages and disadvantages of hard money loans, please contact Bold Growth Solutions