Not having money when you desperately need it is scary—not qualifying for a loan makes the situation even worse. A bad credit rating is one of the top reasons why banks and other traditional lenders may deny you a loan, but what about non-traditional lenders? Can you get hard money loans with bad credit?
Luckily, you can! Hard money lenders are the solution when you require funds urgently with minimal paperwork and almost no credit checks. We say “almost” because hard money lending is offered by a variety of private investors dictating qualification criteria for different borrowers.
In this article, we’ll walk you through the process of:
- Finding a hard money lender with lax credit check requirements
- Applying for a hard money loan with poor credit
How Do Hard Money Loans for Bad Credit Work?
Hard money loans work even with a bad credit score because a credit score is deemed as a part of your “soft assets” which influence the overall financial health.
These loans are backed only against “hard assets”—essentially assets like real estate, jewels, and machinery that have tangible monetary worth. Loans offered by traditional credit providers like banks are guaranteed against both hard and soft assets. Banks do an adequate background check by evaluating your past financial due diligence, tax compliance status, future income predictions, and the value of the collateral (hard asset). The entire process can take about 2–3 months. Your loan request is approved only if the calculated risk of default is considerably low.
Applicants with poor credit opt for hard money loans because these lenders are ready to tolerate a higher level of risk, unlike traditional lenders. A borrower’s credit history holds little value to them because, in the event of default, they can sell or auction off the asset and recover their loan principal plus accrued interest and costs.
Source: RODNAE Productions
Interest Rates and Repayment
As for interest rates, hard money lenders charge you higher than traditional lenders not only because of the greater risk tolerance, but also because they have less stringent eligibility requirements and a lax documentation and approval process. You can expect interest rates between 8% and 22%, which is about 1.15 to 3 times higher than standard mortgage rates.
Because of the high risk component, hard money loans usually have a shorter repayment window than conventional loans. Most hard money lenders give people with bad credit six months to three years to repay the loan. If you cannot pay it off quickly, try reinstating your credit score so that you qualify for a refinance loan with a lower interest commitment as soon as possible.
How To Get a Hard Money Loan With Bad Credit—Steps
Getting a hard money loan with poor credit can be easy or difficult, depending on the options available in your state. Here are the three basic steps to get the best no-credit-check hard money loan:
- Find and evaluate potential lenders
- Fulfill the eligibility criteria for the loan
- Apply for the loan
#1 Finding Hard Money Lenders With Minimal Credit Check Requirements
While there are plenty of hard money lenders around, pay attention to finding the best option for your situation. Most borrowers start by combing online for reputable hard money borrowers around them and checking if they ask for a qualifying credit score or not. They also look at quality Google ratings and past borrower experiences in reviews (if available), both being great indicators of a reliable lender.
Another good strategy is to tap into your real estate network to get recommendations for lenders willing to loan without a credit check. Once you have a list of lenders, go to their website or call them to enquire if they offer loans to individuals and businesses with spotty credit status.
Most hard money lenders do not look into your credit score right away or at all. They’ll first evaluate the collateral you’re providing, the LTV (loan-to-value) ratio, and your repayment strategy. That being said, a small category of hard money lenders only deal with people who have a credit score rated Fair or better—check out the relevant categories for your reference:
|Credit Score Range
|800 and above
Keep in mind that if a hard money lender cares about your credit history, they’ll likely ask for a high interest rate (think 14% and above) to set you up with a loan. If you want an optimum deal, apply to more than one lender so that you can compare the terms and conditions offered by each.
#2 Fulfilling the Eligibility Criteria for No-Credit-Check Hard Money Loans
Hard money lenders who don’t do credit checks look at three qualifying aspects of the deal:
- Eligibility of the collateral—The hard money lender would be most concerned about the collateral you’re offering, the latest market value of the asset, and the amount of equity you hold. Certain lenders only accept non-owner-occupied properties as collateral, while others may consider any real estate or valuable item
- LTV ratio—LTV is usually expressed as a percentage of the collateral value or the asset’s purchase price, depending on your situation. On average, hard money lenders offer 50%–75% LTV and require borrowers to arrange the gap from their personal funds. Borrowers with poor credit scores usually don’t get higher LTVs as the risk of default would be unacceptable for the lender
- Repayment strategy—The lender would want to understand your repayment strategy, which can be selling off real estate for a profit, getting the loan refinanced, or securing a business deal. If your repayment strategy is unpredictable, the lender may ask for a higher-than-average interest rate
Besides the basic eligibility requirements, some lenders may conduct additional due diligence if your credit score isn’t looking too good. It’s all about whether you can be trusted—if you’ve had multiple bankruptcies in the past or are functioning on too much debt without a viable exit strategy, you may be refused a loan until you close one of your existing debts.
#3 Applying for a Hard Money Loan
The process of applying for a hard money loan differs from one lender to another. In most cases, you’re asked to fill out an online or physical form with details about your business (or source of income), property location, fund requirement, and similar. The lender may carry out property appraisal during processing to get the current values of your collateral. Once your loan is approved, you’ll have to submit your title deed and other relevant documents for legal documentation.
Source: RODNAE Productions
Need a Hard Money Loan With No Credit Check? Choose Hard Money Loan (HML) Solutions
Hard Money Loan (HML) Solutions offers all-purpose hard money loans to anyone with a good investment deal or solid collateral—your credit score and past financial hiccups would not affect the interest rates. The Florida-based veteran lending group is one of the most competitive instant financing options for both business and consumer-purpose loans. HML Solutions consists of top-tier entrepreneurs and investors waiting to put their surplus funds into a lucrative deal.
HML lenders don’t fuss over poor credit scores, tax defaults, or other technicalities. You’ll be approved for a loan as long as you:
- Present a sound collateral
- Have enough equity in the asset
- Agree to the LTV ratio offered
Here’s a quick overview of the major lending terms with HML Solutions:
|HML Solutions Lending Terms
|9.99%–12% (depends solely on the LTV—lower LTVs get lower rates)
|Up to 70% of the current purchase price or appraised asset value (whichever is lower)
|Interest rate type
|2 points or 2%
|3 days to 2 weeks
Applying for a loan at HML Solutions is a far better option than going to other lenders because the group:
- Charges interest rates on the lower side of standard rates
- Asks for low origination fee (it’s common for hard money lenders to charge 5%–6% as origination fees)
- Doesn’t ask for a down payment
Source: Kampus Production
Why Borrowers With Bad Credit Choose HML Solutions
Unlike most other hard money lenders, HML Solutions is open to considering all kinds of deals, such as bridge financing, flipping properties, buying housing units (owner-occupied or not), acquiring a business, etc.
The group has a 5-star Google rating and multiple user reviews from satisfied customers. The goodwill is not only because of convenient lending terms—customers appreciate HML Solutions’:
- Flexible lending terms—HML lenders believe in presenting tailored, common-sense deals to every customer to avoid overcharging, undercharging, or dumping unnecessary burdens on distressed borrowers
- Speedy approval process—Hard money lenders take 10–14 days on average to fund, but at HML Solutions, approved borrowers can have access to the cash in as early as three days (considering the title work is easy)
- Honorable funding commitment—The HML team will never back out of funding once they’re verified and approved your loan request
- Minimal paperwork requirement—The group values borrowers’ convenience and cuts to the chase when it comes to paperwork, only asking for the necessary property documents required for the legal work
- Solution-centric approach—HML lenders value profitable deals, but at the end of the day, they care about helping people. Even if a loan is disapproved, the applicant has the liberty to chat with the lenders to chalk out foreseeable alternative solutions
Apply for a Loan at HML Solutions Right Away!
Applying for a loan at HML Solutions hardly takes a few minutes. You can:
- Call the lenders directly at (855) 244-2220
- Fill up a simple online application form—a lender will evaluate your form and contact you shortly
When you talk to an HML lender, make sure to be truthful about all essential aspects of your situation. While you won’t be denied a loan for having bad credit, you may be instantly rejected if the lenders uncover false statements during the processing phase. HML Solutions hears out anyone in need of funds without judgment or prejudice.
Complete the application form today to explore your options with Hard Money Loan Solutions.
Are Hard Money Loans Only Used in Bad Credit Situations?
A hard money loan isn’t a mere savior for individuals and businesses with a shabby FICO score. Because of the minimal paperwork requirements and speedy approval process, it works for anyone who needs funds quickly (say within 2–3 weeks) and conveniently.
Hard money loans are typically used by seasoned real estate investors who want to bypass bureaucratic regulations and secure financing for time-sensitive deals. Based on current industry trends, this type of borrowing is also popular for:
- Financing self-occupied or residential rental properties
- Securing commercial land
- Purchasing business assets
- Funding high-risk startups
- Expediting construction projects when raw material prices are low
People with bad credit standing also use hard money loans to pay off their existing dues and improve their credit scores. Remember that hard money lenders do not report to credit bureaus, so the loan per se would have a neutral impact on your credit score.
Getting Hard Money Real Estate Loans With No Credit Check
The majority of the no-credit-check hard money loan requests are about real estate purchases and renovations. In the case of real estate deals, hard money lenders generally consider your end goal—whether you’re flipping a property or want to keep it.
Regular property flippers tend to get quick approval from hard money lenders, even with bad credit. If you do it occasionally, you may have to explain how you’re covering the LTV gap, renovation costs, or unplanned expenses. It’s all about assuring the lender that their investment won’t go cold in unpredictable circumstances.
Most house flippers get a loan based on the property’s ARV (after-repair value) minus the repair costs. Say the ARV is $400,000, repairs cost around $60,000, and the LTV ratio is 60%—the lender won’t offer you more than $204,000 [($400,000 – $60,000)*60%]. Be aware of your personal cost commitment and plan out how you’ll get the rest of the funds—e.g., whether you’ll use your savings or seek a personal loan.
If you’re buying a property for housing purposes, the lender will focus more on whether you plan to refinance with a conventional mortgage plan once your credit score improves, and in case you won’t refinance, how you plan to keep up with the payments.
Featured image source: Mikhail Nilov