Define 'hard money loan'.

A hard money loan is characterized as a short-term loan that is secured by real estate assets, and it typically comes with higher interest rates compared to conventional loans. This type of financing is often used by real estate investors or developers who need quick access to funds, as hard money loans are usually processed and funded much faster than traditional loans. The focus on the collateral—real estate—is significant because it allows lenders to recover their investment more quickly in case of default, which is why the interest rates are generally elevated.

This financing option is commonly preferred in situations where borrowers require immediate capital which may not be feasible to obtain through standard mortgage channels, such as during property flips or urgent purchasing scenarios. The terms and conditions surrounding hard money loans can be more flexible, but they come with the trade-off of increased costs.