What is the Difference between Hard Money and Soft Money? | Riverdale Funding

What is the Difference between Hard Money and Soft Money?

Sep 21, 2016

You will come across the terms “hard” and “soft” (conventional) in your quest for a loan for investment purposes. You need to understand the difference between hard and soft money for you to make the right decision. We explore the differences between hard money vs. soft money and how to apply for the right loan for you.


Hard Money vs. Soft Money Loans

Hard money means that you get money for a particular set of uses. The repayment criteria are spelt out clearly and applied to the loan. On the other hand, a soft money loan doesn’t come with a particular use associated with it in order for you to qualify.

In essence, soft money loans are a combination of traditional lending and hard money lending. With soft money loans, you are still expected to pledge your assets as collateral for the loan. However, your credit is also taken into account giving you a longer repayment term and lower interest rate (assuming that you have a satisfactory credit score).

Once you have understood this difference between hard and soft money loans, you need to know that your needs as an investor will be best met by a hard money loan. In this regard, you will want to know what these loans are, how you can access them, and whether using them is the best option.


Understanding Hard Money Loans

This loan has rigid, precise terms. It is available to you for a short period, usually between six months and one year. The interest rate is specific and not necessarily determined by your credit score.

The nature of the loans makes them suitable for flipping properties, constructing new properties or as bridge loans. All these projects need you to borrow a certain amount of cash quickly for a very short time, until the property is sold off or refinanced.

Here is a typical scenario where a hard money loan will come into play: You are an investor who has found a property that needs repairs at a very good price. Obtaining a hard money loan is the best way to get the cash within the shortest time possible, pay for the property, repair it, and sell it or rent it. When the deal is complete, you get to pay back the loan and have your profit.


What about My Credit Score?

Are you worried about your low credit score? Well, worry no more because you can still qualify for a hard money loan whether you have a poor credit history, or you have defaulted in your home ownership. You can also use the hard money loan to raise your credit score. This is because you will confirm to credit bureaus your ability to repay the loan.


Ready for Your Hard Money Loan Application?

Contact an expert Account Executive at Riverdale Funding at 888-368-4983 and we would be happy to quickly assess your commercial loan scenario and quickly providing you with the commercial real estate loan you seek.