Bridge Loans vs. Hard Money Loans: What's the Difference

Most conventional bank loans are long-term mortgage loans that can extend as long as 30 years. However, when real estate investors want to make short-term investments, these traditional loans simply do not meet their financing needs.

Two of the most common types of unconventional loans investors seek out are bridge loans and hard money loans. In this article, we’ll explain bridge vs. hard money loans to examine what the difference is between these two types of financing.

Bridge Loans

Let’s start by looking at how bridge loans work. Bridge loans are short-term and temporary loans that give real estate investors fast cash flow while they look for permanent financing.

Real estate investors often use bridge loans to purchase, renovate, and resell multiple properties fast. Bridge loans may be offered by both traditional lines of credit or private lenders. However, these loans typically expire after an average of one year. Speak with a hard money bridge lender today if you think applying for a bridge loan would meet your financial needs.

Key Characteristics

  • Bridges the gap between needing financing and receiving financing
  • Short-term, typically end after one year
  • Commonly used for fix-and-flip real estate investments

Hard Money Loans

Hard money loans are also known as private loans. When traditional bank loans do not approve investors, hard loans are a popular and effective alternative source of financing.

The most unique and distinguishable quality of hard money loans is that these loans are asset-based, meaning private lenders offer financing based on property value, not credit histories. In addition, since private lenders finance hard money loans, the process of getting approved and receiving cash flow from these loans is much more rapid than traditional bank loans and bridge loans.

If you think hard money loans are a viable financing option for your real estate investments, speak with a hard money lender to get started.

Key Characteristics

  • Alternative to conventional bank loans
  • Asset-based instead of credit-based
  • Fast approval rates

The Takeaway

Investors can benefit significantly from each of these loans. For investors who need to secure immediate financing for a property but do not have the funds to do so, bridge loans will be an ideal loan choice.

For those with lower credit scores or valuable property, hard money loans are also an effective substitute for conventional financing. Review our guide of bridge loans vs. hard money loans: what’s the difference and speak with a lender about your financing options today.

Here at LJC Financial LLC, we offer some of the best financing and guidance for hard money and bridge loans. If you’re unsure which of these two financing options will fit best with your investment goals, speak with one of our representatives. Our team of experts will help you feel confident about your financing plans. To learn more about our loans or our services, browse our website.