Property ownership is a key part of the American dream, but making it happen can be more challenging than you anticipate. Having an investment property that you can buy cheaply, renovate and flip for a profit is another common dream. However, since one in three Americans struggles with poor credit, many ordinary people are not able to take advantage of the opportunities they see in front of them. Without approval for a loan or mortgage from a traditional bank, there is no way for them to take on a home remodeling project that can provide them with a nest egg they can save for the future. This is where taking a hard money loan can come into play as a potential solution.

What is a Hard Money Loan?

A hard money loan is an alternative to a mortgage that is provided by a non-traditional bank. These loans typically have a higher interest rate and shorter term than a traditional mortgage. However, these loans can be much easier to get than an old-fashioned mortgage, and take much less time to get put in place. Hard money lenders do not examine your finances in the same way that a conventional bank does, and this makes the process simpler. With no underwriting process, there is much less back and forth to provide proof and documentation.

What is a Hard Money Loan Good For?

The ideal situation for a hard money loan is one where the borrower can pay off the loan in a short time. For example, if the borrower is able to purchase a home for a low price, do renovation work to improve it, and sell it quickly for a sizable profit. Another situation where a hard money loan works is if the borrower needs the money to get in the house before it sells to someone else, but anticipates getting a lump sum of money in the future from an inheritance or settlement.

Situations where a hard money loan is the best possible option abound in today’s marketplace. With a better understanding of the answer to the question “what is a hard money loan?”, you can make an informed decision on what projects are right for this kind of loan.