What type of loan typically has a shorter repayment term and higher interest rates?

A hard money loan typically features a shorter repayment term and higher interest rates compared to other types of loans. These loans are often secured by real estate and are primarily provided by private lenders rather than traditional financial institutions. The characteristics of hard money loans reflect the higher risks for lenders, particularly due to the shorter duration and the less stringent approval process. As a result, borrowers can expect to pay significantly higher interest rates and fees as compensation for that risk.

The nature of hard money loans makes them suitable for specific scenarios, such as real estate investors needing quick access to capital for property rehabilitation or purchase, where longer conventional financing might not be feasible. This contrasts with standard mortgages, which generally have longer repayment periods and more favorable interest rates. Consequently, understanding the context and purpose of different loan types is crucial for making informed financial decisions.