Understanding How a Hard Money Loan Works With Bad Credit

Couple with Bad Credit

If you have bad credit, finding financial products to purchase a home isn’t always easy. It’s even harder when you’re a real estate investor and need a loan to purchase another property. When you’ve had properties foreclosed on or you’ve been late with payments, this brings your credit score down and makes it hard to find lenders willing to work with you. However, there are options. Continue reading to learn more about hard money investor loans in Texas and how they could benefit your situation.

What Is a Hard Money Loan?

For those new to the hard money lending concept, you might not have any idea what this program is. Hard money loans are ideal for people with bad credit because lenders of investor real estate loans in Texas aren’t concerned with your credit score. What these lenders are most interested in is the value of the property. Hard money loans are considered collateral-securing loans. If something happens and you can’t pay back the loan, the lender simply takes possession of the property and makes their money back this way.

Hard money loans are short-term financial products. They were designed for real estate investors, not people interested in 30-year mortgages. Unfortunately, when investors have deals that fall flat and they can’t pay the mortgage, it leaves them with a bad credit score and foreclosed properties. It also makes them ineligible for bad credit lending programs reserved for traditional home loans. When you’re an investor and you have less-than-perfect credit, finding lenders for real estate investors is hard, which is why hard money loans are the perfect solution.

The Benefits of Hard Money Loans for Bad Credit

The #1 benefit is that you’re more likely to be approved for a loan. As mentioned previously, these loans are collateral-securing loans and not credit-based. If the property has enough value and equity, securing a loan is easier.

Hard money loans offer bad credit borrowers the following benefits:

  • Fast closing – Hard money loans close faster than traditional loans, which means you can start making repairs or doing what’s needed to get the property back on the market and sold ASAP.
  • Available for all types of properties – Hard money loans are real estate investor loans for residential and commercial properties. They can even be use for land purchases.
  • Flexibility – Unlike traditional loans, these hard money loans look at each situation individually. Because you’re dealing with a smaller company, you don’t have to put up with the strict policies banks and other mortgage companies have in place. 

Using Credit Card

Is a Hard Money Loan Right for You?

Hard money loans are an attractive option for investors with past financial challenges and bad credit scores. But are they right for everyone? If you’re considering this type of loan, keep in mind that these loans are short-term. Hard money lenders want to be paid back within 6 months – 5 years, depending on the loan terms. Also, because these are short-term financial products, the interest rates are higher. Paying the loan off as quickly as possible saves you the most money.

To learn more about how hard money loans benefit those with bad credit, contact Investor Loan Source today!

Bank vs Hard Money Loans

House Keys

Are you familiar with the term hard money loan for real estate investing funding in Texas? You might have heard of this kind of loan before, but you may not understand how it differs from traditional bank loans. If you’re considering investing in real estate but don’t have a solid financial background or good credit, keep reading to learn the benefits of hard money lending.


Hard money loans aren’t ideal if you’re buying your forever home and looking for a low-rate on a 30-year mortgage. However, these loans are wonderful for house flippers looking for short-term lending options. The interest rates on hard money loans are higher than your average home mortgage and are a high-cost lending product for the average buyer. However, real estate investors aren’t your average buyer. When you invest in real estate, you need cash fast to make the deal and turn around the home as quickly as possible. For house flippers looking for legitimate real estate investing funding, hard money loans provide many benefits.

Credit Isn’t an Issue

Traditional banks have strict lending policies and require minimum credit scores from their applicants. Hard money loans might look at your credit, but this type of real estate investor funding is concerned more with how much equity is in the property than your credit score. Most investors with poor personal credit scores don’t have a problem qualifying for a hard money loan based on their credit history. Instead, the hurdles they face may have more to do with the amount of equity in the property.

If you’re considering purchasing a piece of property with a hard money loan, do your research. Hard money lenders invest in properties with 30%-50% of equity in the property as a protective measure. What does this mean for you? It means you need to find properties at the right price to make hard money lenders happy. While they may loan you up to 100% of the purchase price, they want 30%-50% of built-in equity already in the property. Therefore, if you default on the loan, they’re able to recoup their investment.


Stream-lined Processes

Traditional bank loans can take as much as 90 days to close. This means 3 months waiting for keys to the property. Anyone interested in real estate investing knows that timing is everything. What’s hot today might not be hot 3 months down the line. For this reason, hard money loans make better sense for investors. Depending on the type of loan you’re applying for, the closing process can be completed in as little as 5 days. Hard money lenders look at each case individually and aren’t tied to strict lending requirements like traditional banks or mortgage lenders. This is a huge benefit for real estate investors who need to close a deal fast.

The biggest difference between traditional bank loans and hard money loans is that hard money lenders have programs designed specifically for investors. These loans make the process quick and easy, include funding for repairs and renovations, and don’t require any money down. If you’re interested in learning more about accessing a real estate investing fund in Texas, contact Investor Loan Source and learn more about their residential, rental, and commercial investor loans.