Hard Money Loans, Explained in Plain English

Hard money is short-term real estate financing from a private lender, secured by the property and approved mainly on the strength of the deal. It's built for investors who need to move fast or buy property a bank won't finance. You pay more for that speed and flexibility than you would for a bank mortgage.

Where the name comes from

"Hard" refers to the hard asset, the real estate, that backs the loan. The lender looks first at the property's value, the plan for it and how you'll pay the loan off. Your income and credit still get reviewed, but they aren't the deciding factor the way they are at a bank.

How these loans are usually set up

Terms vary by lender, but the common pattern looks like this:

• Short term: often 6 to 24 months.
• Interest-only payments: the balance is repaid in full at the end.
• Secured by the property: through a mortgage or deed of trust.
• Business purpose: for investment property, not a home you'll live in.
• Borrower is often an LLC: with the owners signing a personal guarantee.
• Pricing: a higher rate than a bank, plus points paid at closing.

RSC Private Lending's Fix & Flip, New Construction and Bridge loans, for example, are 12-month, interest-only loans.

When investors reach for one

Hard money fits deals where a bank is too slow or won't say yes:

• Fix & Flip: buy a dated or damaged house, renovate, sell.
• New Construction: build on a lot, then sell or refinance.
• Bridge: buy or refinance quickly while you line up long-term debt or a sale.
• Competitive offers: close in days instead of waiting on bank underwriting.

When the work is done, many investors either sell or switch to long-term rental financing, for instance a debt service coverage ratio (DSCR) loan that qualifies on rent.

A simple example

Example: An investor finds a house listed at $210,000 that needs a new roof, kitchen and electrical work. A bank won't lend on it in this condition. A private lender funds most of the purchase and the rehab, the investor renovates over five months, sells for around $340,000 and repays the loan from the sale.

The trade-off

You're paying for speed, flexibility and a lender willing to take on a property mid-transformation. That makes sense when the deal's profit easily covers the higher cost. It doesn't make sense for a stabilized rental you plan to hold for ten years.

What this means for you

Think of hard money as a tool for a specific job: getting a deal done quickly and carrying it through a renovation or transition. Use it with a clear plan to exit, and it can open deals you'd otherwise miss.

Want to see how a private loan would work on your next deal? Send RSC Private Lending your scenario for a term sheet in 24 hours. Subject to underwriting.