What defines a hard money loan?

A hard money loan is defined primarily by the fact that it is secured by the value of the real estate itself rather than the creditworthiness of the borrower. This means that lenders focus on the asset being used as collateral rather than evaluating the borrower's credit rating or financial history.

What makes hard money loans distinct is their appeal to borrowers who may not qualify for traditional financing due to various reasons, including poor credit or an urgent need for funds. Because the loan is secured by the property, lenders are willing to take on higher risks associated with less scrutiny on the borrower's financial background.

In contrast, the other choices highlight aspects that do not define hard money loans. Options that involve borrower creditworthiness, property appraisal requirements, and interest rates being lower than conventional loans do not align with the fundamental characteristics that differentiate hard money loans in real estate financing.