Outlining the Process of Hard Money Lending

The process of hard money lending is something that many people are not familiar with. Most business owners typically deal with your traditional lenders, although hard money lenders are a legitimate option to consider. Here is the basic process of how hard money loans work.

Locating a Lender

One of the toughest parts of the hard money lending process may be locating a lender. Not every area has an abundance of hard money lenders. Hard money lenders have to be licensed to do business in a geographic area. Therefore, they may not decide to get licensed in multiple states. They might just want to do business in a particular city or region as well. You may have to do some investigating in order to find one that can service you.

Check online first, because many lenders have websites advertising their services. If you can not find a website of a lender in your area, ask any traditional lenders in the area if they know of hard money lenders. They can often refer you if you do not qualify for a traditional loan. You might even be able to find a listing in the phone book.


After you have located a hard money lender, you need to apply for the loan. They will have an application to fill out much like a traditional lender. If you find the lender online, you may be able to apply online. The application will ask you for a lot of basic information like your name, address, phone number and social security number. It will most likely ask you several financial questions as well. It will also ask you to detail the information about the property or the reason for your loan.


Once you have applied for the loan, the hard money lender will assess whether or not they will offer you a loan. They are typically a very small operation and therefore, they do not have the multiple levels of business to pass the application through. They usually make each lending decision on their own, based on their own personal criteria. This means that they will often have an answer for you very quickly. Many times within one to three days, you will know something.


The terms of a traditional loan are quite a bit different from a hard money loan. The first thing that you should know about the terms is that the interest rate is going to be high. In fact, it might be double or triple what you could get with a traditional loan. This is why most people save a hard money loan for their last option.

The payment terms will usually be flexible. In many cases, you will pay only the interest on the loan for a certain time period. Then you will have to pay a large balloon payment at the end to eliminate the balance of the loan. Therefore, these loans are usually only designed for short-term needs.