Insula Capital Group

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What are Hard Money Loans and How Do They Work?

Are you considering securing a hard money loan but are clueless about how it works? Well, say no more! We’ve prepared an easy and quick guide to help you learn all about hard money loans.

Read on to learn more.

What Is a Hard Money Loan?

Hard money loans are a mortgage type suitable for real estate transactions. These loans are also referred to as “bridge loans” or “last resort loans”. As mentioned, these loans are usually used for real estate opportunities and are offered by private lenders rather than traditional banks.

How Does a Hard Money Loan Work?

The terms of hard money loans are primarily determined by the property’s value that’s utilized as collateral, and not the investor’s credit history, score, or other qualifications. Moreover, hard money lenders are individuals who see potential in the borrower’s real estate venture. Property flippers may seek hard money loans if they intend to refurbish and resell a real estate property within a year or sooner.

The increased interest rate of a hard money loan is countered by the borrower’s intention to pay it off as soon as possible and some additional benefits offered.

Pros and Cons of a Hard Money Loan


A major advantage of hard money loans is the expedited approvals that are much quicker than applying for any conventional or other loans. This is because traditional lenders and loans focus on the borrower’s qualifications and other details, taking up time to evaluate an individual’s creditworthiness. However, hard money loans focus entirely on the venture’s potential, leading to quick approvals.

For instance, lenders take up less time going over a loan application, confirming income, and checking financial paperwork. If the borrower defaults, hard loan investors may have a better value and possibility to sell the property. As a result, they are less concerned about receiving the payments.


Hard money loans often have lower LTV ratios than standard loans, ranging from 50 to 70% because the property serves as the only guarantee against default (though it can rise if the investor is experienced).

In addition, interest rates are typically high. The interest rates for hard money loans can be considerably higher than for subprime loans. In 2020, the average interest rate for a hard money loan in the United States was 11.25 percent, with prices ranging from 7.5 % to 15 %.

Another disadvantage is that, due to regulatory scrutiny and compliance restrictions, hard money loan lenders may refuse to finance an owner-occupied house.

Let Our Hard Money Lenders Help You Secure Hard Money Loans

A person securing a loan with a leading private lender, Insula Capital Group

Are you looking for hard money lenders to secure your hard money loan? Look no further than Insula Capital Group!

Insula Capital Group is a leading private lending company offering various hard money loans. Our hard money loans are applicable for all real estate projects, such as fix and flip projects, land development, buy and hold, new construction, etc.

Get in touch with us to request a quote today!