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!