There are technically two types of money in terms of the lending business. Money is considered to be either soft or hard when referred to in the language of finances and loans. Soft money is a term used for loans that are often offered by banks. A hard money loan however is a type of loan that conventional banks would not provide. This loans are short termed and have higher interest rates. Interests rates go as much as 15% to 18% and would last for six months to a year with an option to extend. Real estate properties are used as collaterals when securing hard money loans. Typically, hard money loans are secured by those people who are in need of quick cash that most banks cannot support it. These are often secured by individuals faced by foreclosure or emergency financial needs. A borrowers’ credit score is oftentimes not being checked and the amount released and loan structure is based upon the quick sale value of the real estate property. In most cases the typical amount of loan releases is around 60% to 70% of the quick sale value in order to protect the lender in any event that the borrower was not able to pay off the loan.

As mentioned, hard money loans are not offered by banks but by private lenders. These hard money lenders have the tight to set the interest rates but the state exerts a conscious effort to regulate the value of these interests. The loans are usually more expensive than traditional loans and the borrower runs the risk of losing the property. This is why it is important to have a real estate attorney review the loan terms in order to make sure that the property is not easily lost as a result of late payments.