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What's the difference between hard money bridge loans and peer to peer loans? Not a whole lot, but there are some distinctions in how the terms are used.
First of all, let's start with an overview of hard money. Hard money loans are generally loans that are secured by real estate using a low Loan to Value (LTV) ratio and a high interest rate. Credit score really doesn't matter too much to a hard money lender, because they are more intersted in the high rate of return. Their security comes from the knowledge that they can foreclose on the property in the even the borrower defaults.
The loan is doubly safe for them, because the LTV is not only low-balled (60 to 70% max, generally), but the value itself is low-balled using a value that is deemed by the investor to be the "quick sale value." This means the investor can theoretically get his money back in fairly short order in case of default.
Now, let's deal with the bridge loan aspect of hard money bridge loans. A bridge loan is a short term loan that is only intended to fill a gap between the purchase (or need for capital, as the case may be) and the availability of conventional financing. Most conventional financing sources (underwriters/loan investors) require a seasoning period from the time of purchase before they will refinance a property. Let's say an investor has the opportunity to buy a property severely under market value, but the property needs a lot of work.
If a conventional lender will not loan money for the deal because of the condition of the property, a hard money bridge loan may be secured which would give the borrower time to make needed repairs during the "seasoning period." Then the hard money loan could be refinanced conventionally at a lower rate.
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