What can you do when you have bad credit, but want a loan for your own property or an investment property?
If you try to get a traditional loan and learn you don’t qualify because of insufficient income or a poor credit score, don’t despair.
There’s another option for bad credit loans in Georgia — they’re called hard money loans.
What is a Hard Money Loan?
A traditional bank or credit union wants to know you have a good credit history and enough income to pay off a loan. If you do, they will approve your loan request.
But bad credit happens all the time. Maybe you had a family emergency that maxed out your credit card, and you’re having trouble paying it. Or, perhaps you were laid off from work and couldn’t pay your bills.
What can you do if you don’t qualify for a loan from a traditional source like a bank or credit union?
If you have property to use as collateral, you can get a hard money loan from a private lender. A hard money loan is based on a property’s value, rather than your credit rating or income.
Hard Money Loans vs. Traditional Lending
A hard money loan is a short-term loan secured by a property’s value.
The amount of the hard money loan is based on the true value of the property. Traditional loans are based on the purchase price of the property, not its actual value.
Traditional mortgage loans are 15 to 30 years. The average length of hard money loan for people who need bad credit loans in Georgia is 12 months.
Some loans can be extended 2 to 5 years. You probably don’t want to hold the loan for any longer since the interest rate is higher on hard money loans than a regular home loan.
Hard money lenders don’t have strict income and credit verification guidelines, which lead to higher default rates, so they charge steeper interest rates.
The hard money loans require monthly payments of interest only, or interest plus some principal, and a balloon payment at the end of the loan.
Hard money lenders aren’t affiliated with banks or mortgage lenders. They are private lenders, who aren’t as interested in your ability to repay since the loan is secured by the property.
If you default on the loan, the private lender will take back the property and resell it to recoup their investment. That’s why the property value is more important than your credit score or income.
Benefits of a Hard Money Loan
When you can’t secure a traditional loan or need money fast, a hard money loan can be the answer. Private lenders aren’t as strict as a bank. There is no formal appraisal process or requests for tax returns and credit reports.
A hard money loan can be closed in days or a couple of weeks. If you need money fast, this can be your solution.
The lender is focused on the collateral, not your credit history and income, so loans can happen faster.
Borrowers who are trying to improve their credit can get a hard money loan for six months or a year while they work to improve their credit score. Once they have a good credit score, they can refinance the hard money loan for something with lower interest.
If you need a loan fast that isn’t based on your credit score, a bad credit loan in Georgia could work for you in the short term.
Loan approval is easier because hard money lenders focus on the collateral — the value of your property. They aren’t concerned about your credit history or income as much as a traditional lender. If the property has real value, you will be approved.
It’s important to note that hard money lenders maintain low loan-to-value ratios. The ratio could be 50% to 70%.
Most lenders won’t finance 100% of a property. The reason for this is so they can quickly sell the property if you default on the loan. You’ll need real assets to qualify for the hard money loan.
The borrower needs to have some cash available if the loan is for a purchase, rather than a remodel or improvement.
Most private lenders are smaller companies who don’t use regular underwriting channels. Each deal is an individual transaction. You may be able to negotiate the repayment schedule and terms.
Hard money loans are expensive, but they do offer a flexible solution to people with poor credit who want to purchase a house to live in, or as an investment.
It’s an excellent temporary solution until you’re in a better financial position to qualify for a lower interest loan.
Hard Money Loan Risks
As with any loan, if you can’t cover your debt, you’ll be at risk. If you don’t pay the loan, the lender will take possession of the property and sell it.
While there are fewer requirements than traditional loans, there are higher loan rates that may keep some people from applying.
Hard money loans are good for short-term loans. If you don’t want to lose your home to foreclosure or miss out on purchasing a property, consider a hard money loan.
It’s possible to use a hard money loan to purchase a property and stay there, but you’ll probably want to refinance as soon as you can to get a loan at a lower rate.
Call Us for Bad Credit Loans in Georgia
If you have any of the following concerns you need a hard money lender who specializes in bad credit loans in Georgia.
• Need a Loan Quickly?
• Can’t Qualify for a Conventional Loan?
• Trying to Avoid Foreclosure?
• Want to Restructure Debt?
• Considered a Risk by Conventional Lenders?
We offer loans for people with bad credit or difficulties documenting their income by traditional methods.
Realty Resources Corporation is ready to provide bad credit loans in Georgia. You can apply online, or call our office 404-252-7070 to learn more.