What is a hard money loan?

A hard money loan is indeed a type of loan that is secured by real property. These loans are typically issued by private investors or companies rather than traditional lenders like banks. The primary characteristic of hard money loans is that they rely more on the value of the property being used as collateral than on the creditworthiness of the borrower. This makes them a viable option for individuals who may have difficulty obtaining a conventional mortgage due to poor credit or insufficient income documentation.

Hard money loans usually come with higher interest rates and shorter terms, primarily because they are considered riskier investments for the lenders. They are often used for real estate transactions, such as purchasing a property to fix and flip or as a bridge loan during more extensive financing processes.

Other options in the question do not accurately define hard money loans; for instance, personal expenses involve various types of financing that do not provide collateral in the form of real property, while government-backed loans are characterized by lower interest and usually more stringent requirements. A synthetic loan implies the use of financial instruments that are not typical of hard money lending practices.