What Does Your Credit Score Have to Be for a Hard Money Lender?
Hard money lenders are individuals or companies that specialize in providing short-term loans. These loans are usually insured by real-estate properties and have higher interest rates than what banks are offering. The hard money lenders are an alternative to the bank for access to quick money loans or when bad credit prevents you from loaning from a bank. Hard money lenders usually require a real estate property as collateral or some other assets.
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Credit Score
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Typically a hard money loan is not influenced by your credit score. The purpose and existence of hard money lenders is to provide financing option to those who have bad credit or credit problems. Therefore, your credit score is irrelevant when applying for a hard money loan. If your credit is in good standing order you should probably apply for a loan to a bank. If you already have payments to make to a bank and no credit problems you can apply for a refinance loan to a different bank. Banks provide less risky options and a lot lower interest rates than what a hard money lender will. Hard money lenders are a sort of last resort for money loans.
Impact on Credit Score
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Hard money loans do not negatively impact your credit score. Typically you are ensuring payment of hard money loans with real estate property or assets. In the event of not being able to make your payments you will forfeit that property to pay off the debt. Therefore, hard money lenders do not share credit information with banks. Hard money lenders only care about receiving the money back or receiving the property that will pay off the debt. Your credit score will be unaffected.
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Last Resort
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Hard money loans should typically be viewed as a last resort. The interest rates are double or higher than what a bank can offer you. It is also a riskier undertaking. Not being able to make payments on time will result in the loss of the property you insured the loan with. Hard money lenders can also have hidden fees and commissions that can add up on the debt. They are also legally allowed to collect interest on any late payments. That being said, they can be a saving option if you're certain you can make payments on time and have nowhere else to go.
Legal Information
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Most U.S. states do not have any state or federal laws that regulate hard money loans. However, some states do have restrictions on the amount of interest that individuals and companies that offer hard money loans can practice. Be sure to check your local jurisdiction if you're looking to loan money from a hard money lending company.
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References
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