What is a hard money loan typically used for?

A hard money loan is typically used in distressed financial situations. This type of loan is secured by real property and is often provided by private lenders or investors rather than traditional financial institutions. Because hard money loans are based on the value of the property rather than the borrower's creditworthiness, they can be utilized quickly, making them ideal for individuals or entities in urgent need of financing to resolve financial difficulties.

When a borrower faces a pressing financial issue—such as an impending foreclosure or a critical need for immediate funding to stabilize a business or project—a hard money loan can provide the necessary capital quickly. These loans are often short-term and have higher interest rates compared to traditional financing options, reflecting the risk taken by lenders in these distress situations. This option emphasizes the immediate accessibility and flexibility of hard money loans in contexts where quick action is essential.