Difference Between Hard Money and Soft Money

Main Difference

The main difference between hard money and soft money is that hard money is the loan that is used for specific needs, whereas soft money is borrowed with no specific intention.

Hard Money Vs. Soft Money

Hard and soft money is used to refer to paper money or coin money. They also refer to contributions that all politicians welcome with open arms during an election cycle. Hard money is the loan that is used for specific needs and with criteria for paying it back, whereas, soft money is the loan without any specific intention or use. There are more hard money lenders as compared to soft money. Hard money donations are limited to a specific amount; on the other hand, there is no limit for soft money donations. Moreover, only private individuals can donate in case of hard money, on the flip side, soft money may include any type of donors like corporations, labor unions, and private individuals, etc.

Comparison Chart

Hard MoneySoft Money
The loan that is used for specific needs and with criteria for paying it back is known as hard money.The loan without any specific intention or use is known as soft money.
Limitations
Hard money donations are limited to a specific amount.There is no limit for soft money donations.
Lenders
There are more lenders for hard money.Soft money has fewer lenders.
Meaning
Hard money loans are asset-based financing where the borrower gets money, and the funds of the lender are secured by the property.Soft money is the type of asset-based financing that includes both the method of hard money plus the old convention of loans.
Rate of Interest
Hard money has a high rate of interest, i.e., starting at 7 to 8%.The rate of interest for soft money is low.
Risk
As the hard money is given on the base of the property, so there is a high risk in this case.As soft money is given on the basis of credit score, so the risk is lower in this case.
Procedure
It is a difficult procedure to get hard money because it involves property.It is easy to acquire soft money.
Governing
Use of hard money is strictly governed by the government.There is no restriction on the use of soft money by the government.
Investment
Hard money suited for long term loans.Soft money is mainly suited for short term goals
Closing
Hard money has quick closing even may be within two business days.Its closing is a time taking process, takes up to thirty days.
Loans
Hard money gives more flexibility in loans.Soft money has fixed rules and a specific loan structure.
Paperwork
Hard money required less paperwork while closing.Soft money required more paperwork while closing.

What is Hard Money?

Hard money is the loan that is used for specific needs and with criteria for paying it back. If a person needs a long term loan, he should choose hard money. Hard money loans are asset-based financing where the borrower gets money, and the funds of the lender are secured by the property. It is given under strict rules and regulations by the government on the basis of the property. It is limited to a specific amount and requires less paperwork while closing.

What is Soft Money?

This is the type of loan without any specific intention or use. It is mostly used by short term purposes. Soft money is the type of asset-based financing that includes both the method of hard money plus the old convention of loans. As soft money is given on the basis of credit score, so the risk is lower in this case. It is easy to acquire soft money because there are no specific rules and regulations in it.

Key Differences

  1. The loan that is used for specific needs and with criteria for paying it back is known as hard money, whereas the loan without any specific intention or use is known as soft money.
  2. Hard money donations are limited to a specific amount; on the other hand; there is no limit for soft money donations.
  3. There are more lenders for hard money conversely soft money has fewer lenders.
  4. Hard money loans are asset-based financing where the borrower gets money, and the funds of the lender are secured by the property while, soft money is the type of asset-based financing that includes both, the method of hard money plus the old convention of loans.
  5. Hard money has a high rate of interest, i.e., starting at 7 to 8%, whereas the rate of interest for soft money is low.
  6. As the hard money is given on the base of the property, so there is high risk in this case but, as soft money is given on the basis of credit score, so the risk is lower in this case.
  7. It is a difficult procedure to get hard money because it involves property, whereas it is easy to acquire soft money.
  8. Use of hard money is strictly governed by the government on the other side; there is no restriction on the use of soft money by the government.
  9. Hard money suited for long term loans, while soft money is best for short term goals.
  10. Hard money has quick closing even may be within two business days, whereas the closing of soft money is time is taken process, i.e., takes up to thirty days.
  11. Hard money gives more flexibility in loans, but, soft money has a fixed set of rules and a specific loan structure.
  12. Hard money required less paperwork while closing, but, soft money required more paperwork while closing.

Comparison Video

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Conclusion

From the above discussion, it is cleared that hard money is a property based loan that is given for specific needs under the strict rules and regulations by the government. On the other side, soft money is not for any specific purpose and does not involve any government policies.