There is no difference!
Hard money and private money loans are interchangeable terms that reference real estate loans with private investors as the lender, instead of institutional banks. You can potentially get a hard / private money loan when you are unable to obtain institutional / conventional financing. Possible reasons to get private money include: quicker closing time (7-10 days instead of 30-45 days with conventional loans), poor credit, high debt ratios, self-employed, recent bankruptcy / foreclosure, foreign national, or probate
People often believe the term “hard money” was named because the money is hard to get. Rather, “hard money” got its name because the loan is secured by real estate, which is a “hard asset”. The term “private money” has become more popular in the last few years because of the negative connotation associated with “hard money”. Prior to Dodd-Frank in 2010, as a response to the 2008 financial crisis, lenders were not required to document your ability to repay on consumer loans (ex: purchase a primary residence, refinance to consolidate debt, anything not business purpose). These types of loans that don’t document income are referred to as “stated income” and they are now only permitted for business purpose loans.
Hard money lenders refer to themselves as private money lenders. Also called “outside-the-box” lenders, they are trying to stay away from the negative publicity associated with the 2008 recession. It is important for you to know that there is no difference between hard / private money when shopping for a new loan. This is because you should research both “hard money” and “private money” to ensure you’re getting the loan that best suits your needs.