A hard money loan is a stopgap financial solution that typically mandates the borrower to pledge an asset, like a residence, as collateral for the loan. These loans, often referred to as bridge loans, can be utilized to support the purchase of one property while preparing to sell another.

Privately financed loans are not provided by traditional lenders but rather by individual investors or private firms. Individuals may opt for hard money loans if their loan or mortgage application is rejected, or to bypass the time-consuming approval process typically associated with traditional lending methods.

Similar to traditional mortgages, hard money loans use the purchased property as collateral. The term “hard” in “hard money” refers to the loan being backed by a physical asset. These loans have quicker approval processes, making them suitable for swift purchases compared to conventional mortgages and other secured loans.