Is Hard Money Available Even with No Credit Check?

Hard money can be a dream come true for people who cannot get loans from traditional banks. After all, people who pitch hard money lending say you can get a loan even if you have little to put down and your credit is terrible. Lenders do not even check your credit, right? Not so fast.

It is true that credit checks do not play a very big role in determining whether hard money loans get approved. But that does not mean they are not considered at all. Many hard money lenders still look at borrower credit for an entirely different purpose. You need to know that purpose because it may affect how much you can afford to borrow.

Hard Money Is Asset-Based

Let us start by discussing why people say you can get hard money without a credit check. It is because hard money lending is asset-based lending. In other words, lenders are willing to make loans based on the value of some asset you offer as collateral. If the asset is valuable enough, the loan is likely to go through.

Actium Partners is a Salt Lake City hard money lender that specializes in real estate transactions. In most cases, the property being acquired acts as collateral on the loan. Whether or not you would be approved for a loan would be based largely on the value of the target property, how much you want to borrow, and your exit strategy.

Your loan officer would be most concerned about the value of the property. He doesn’t care about your credit history, your current credit score, or anything else of that nature. He wants to know that the property you are buying is valuable enough to recover the firm’s money in the event that you don’t pay.

Interest Rates and Terms

The state of your credit will not come into play in determining whether your lender will approve your loan. Approval is based primarily on the collateral. But rest assured the lender will run a credit check prior to determining rates and terms. The results of that check will affect your rates and terms in the same way they would if you were taking out a conventional loan.

A good credit report with a relatively high score will get you the lowest interest rate and the most acceptable terms. Everything goes down from there. The worse your credit, the higher your interest rate will be. This makes perfect sense when you think of it in terms of risk.

A Higher Risk Cost More

Hard money lenders are already engaged in a risky form of lending. Their risk increases when they loan to people whose credit history proves they have a challenging time paying their bills. So to cover the increased risk, they charge higher interest rates and offer less accommodating terms.

A higher level of risk costs you more because the lender is not willing to carry all the risk himself. And quite frankly, why should he? Lending and borrowing are both risky propositions. The risk should be spread as evenly as possible between both parties.

To say that you can get a hard money loan without a credit check is to ignore the risk involved. It may be true that a hard money lender will not check your credit as part of the approval process. Approval will be based primarily on the value of your collateral. But the lender will still check your credit in order to determine rates and terms. The worse your credit is, the more unattractive those rates and terms will be.