These types of loans are used by investors and real estate owners to perform transactions. Hard money loans are offered by individuals and private companies. However, this article is targeted at hard money loan interest rates.

This loan type is backed by a tangible asset that can be sold, producing profits that will be used to repay the defaulted loan. In this description, we are going to dig deeper into hard money loan interest rates and why one would prefer going for a hard money loan in certain circumstances.

Hard money loans are categorized as a type of private loan. The lenders in this transaction are private lenders (private companies and individuals). 

Difference Between Hard Money Loans and Traditional Loans 

  1. Hard money loans have a loan duration of around 6- 18 months   while traditional loans might take up to thirty years. 
  2. These loans contain an interest rate of 4-10% greater than traditional loans. 
  3. Hard money loans use hard assets/property as collateral while traditional ones are secured by one’s personal credit as well as the property. 
  4. Hard money loans are meant for short-term individual investors whereby traditional loans are for self-occupied properties.   

Hard Money Loan Interest Rates 

In 2019, hard loans interest rates ranged from around 7.5 -15 %. A big number of hard money lenders charge points on offered loans whereby 1 points is equivalent to 1% of the loan. These points are meant to administer the borrower’s administrative loan costs. 

For a hard money loan, total points can range from two to ten percent of the loan amount offered. The points are paid when repaying the loan while the loan interest is charged monthly.  

Hard Money Loan Users 

This loan type is used by real estate investors who need a short-term financial boost to take part in a deal or work on investment. Good deals don’t hang around for long since many people really have an eye on them. 

Therefore, those with enough cash at hand would be in a better position to secure such a deal and make a breakthrough. Hard money loans have been the all-time typical solution for short term financial purposes, especially whereby an investor needs the cash urgently to fix and flip a deal then use the money earned to repay the loan.  

Hard money lenders consider a number of factors when deciding the points and interest rate to charge on mortgages. The factors include: 

Therefore, interest rates vary largely from one hard money lender to another due to differences in requirements and criteria put across by the lenders. That’s why investors are advised to shop in and around their local area. 

Make sure you do research and check out the lenders’ reputation before making a single agreement. Take your time when choosing your lender to ensure they are fair and the set conditions are favorable. 

House flippers regularly go for hard money loans since they cannot borrow from banks due to poor credit scores.  

Pros and Cons of Hard Money Loans 


  1. The cash is granted quickly. This is an advantage to the borrower in a competitive market network since they can acquire the cash within a short period of time and get the hot deals in time unlike investors looking up to traditional lenders
  2. Hard money lenders don’t consider one’s loan history with other lenders for a borrower’s approval. 
  3. Investors use money acquired from hard money lenders to fund their investments while working on long term financing. 
  4. Hard money loans are solely backed by one’s property. Therefore, a borrower is not basically liable for the repayment.  
  5. Hard money loans require a lower LTB ratio thus you don’t have to pay the twenty percent down payment as traditional lenders demand.   


  1. Very high-interest rates compared to other lenders. 
  2. Additional origination fees (points) paid when initiating your payment i.e. 1 -3%  
  3. Since the amount disbursed by the lender is fixed, unexpected expenses in the future may get to handle your project or investment. 
  4. An investor must finish the rehab on time to avoid unnecessary expenses in the future. 
  5. The borrower’s property is held as collateral. Therefore, failure to finish the rehab and late repayment can make an investor lose the property easily. 
  6. Hard money lenders require a builder’s-risk, which is more relatively expensive than the property insurance for mortgages. 

Factors You Should Consider When Selecting a Hard Money Lender 

Seek a lender with experience that matches the form of loan you want. This is to make sure your lender will be interested in your offer since they might find your investment promising compared to as an alternative lender would do. 

Favorable hard money loan interest rate. Loan interests vary from one lender to another since different lenders use different criteria when lending money to their respective borrowers on different terms and offers. 

A great reputation is a very vital virtue that a borrower seeks in a  lender’s history to avoid cases of financial conflicts between the borrower and the lender. Therefore, it’s your duty as an investor to look-see your lender’s reputation before hastily applying for a hard money loan that may end up going astray. 

You could also read about how to refinance a hard money loan.

Are Hard Money Loans Legal? 

Absolutely! Hard money lenders are legitimate companies as well as individuals who fund passionate investors with awesome real estate projects to offer them instant loans to keep their investments moving and repay after a certain period of time. 

However, the industry has been condemning some lenders who take advantage of young investors and prey on their funds. That is why an investor is required to fully check out their lender to be sure about their lending history and learn about their reputation. Research well about your local lenders to choose one with a favorable hard money loan interest.