What You Need to Know About Hard Money Loans

Hard money loans are a form of short-term financing usually secured by real estate assets. Unlike traditional loans, which focus greatly on the borrower’s creditworthiness and income history, hard money loans are mainly determined by the value of the property used as collateral. This asset-based method enables quicker approvals and funding, making hard money loans especially attractive to real estate investors who need to act swiftly in a competitive market.

Comparison with Traditional Loans

While conventional loans might offer lower interest rates and longer terms, they often come with stringent qualification criteria and a lengthy approval process that can deter many potential borrowers. These traditional financing options typically require a thorough examination of the applicant's credit history, income verification, and a detailed appraisal of the property in question. This meticulous vetting can lead to delays that are frustrating for those looking to seize investment opportunities promptly. In contrast, hard money loans present a more appealing alternative for real estate investors and buyers seeking speed and flexibility. These loans are primarily based on the value of the property being used as collateral rather than the borrower's creditworthiness, which allows for a much quicker approval process. However, it is important to note that this convenience comes at a higher cost, as hard money loans usually carry significantly higher interest rates compared to conventional loans. At Oak Tree Capital we understand the urgency that often accompanies real estate transactions, which is why our interest rates typically range from 8% to 15%. This range reflects the competitive nature of our offerings while still accommodating the needs of investors who require immediate access to funds. Additionally, our loan terms average between 12 to 36 months, providing investors with the flexibility they need to execute their investment strategies effectively. This structure allows borrowers not only to secure quick capital but also to plan their repayment strategies according to their project timelines and cash flow expectations.