Hard Money Personal Loans
Before the housing crisis hit, owning a house was like having money in the bank. Even new homeowners wishing to refinance their homes found themselves flush with instant equity – and banks were eager to lend. These days, banks are more stringent with underwriting requirements and lending terms, especially for borrowers with less than ideal credit. For such borrowers, hard money personal loans represent one of their few available options for obtaining credit. But for many of these borrowers, LoanNow could be an even better alternative.
How Hard Money Loans Work
Most lenders require good or excellent credit for homeowners hoping to obtain a home equity loan or a home equity line of credit (HELOC). Both home equity loans and HELOCs are based on the equity accumulated in a home or piece of property. By contrast, hard money personal loans are based on the actual value of the home, not equity. This is one reason why hard money personal loans are available to homeowners with less than perfect credit, when conventional home refinancing loans are not.
ARV and APR
Hard money personal loans are based on the After Repaired Value, or ARV of the home. For example, a home might be worth 175,000 dollars, but need 15,000 dollars worth of repairs. After making the repairs, the home is valued at 200,000 dollars. That’s the ARV. But hard money personal loans typically only cover about 70 percent of a property’s ARV. For a home with an ARV of 200,000, that translates to about 140.000 dollars. Hard money personal loans also typically carry higher interest rates and APRs than home equity loans or HELOCs – often ranging between 10 percent and 20 percent.
Fees and More Fees
Hard money personal loans also typically carry 1 or 2 points in addition to the loan principle. On a loan of 140,000, 2 points translates to 2,800. In addition, hard money personal loans often include closing costs and administrative fees. All those fees add up to increase the total cost of the loan.
The LoanNow Alternative
Many homeowners with less than perfect credit resort to hard money personal loans to obtain financing. But many of these homeowners could qualify for a loan with LoanNow. We look beyond FICO scores to consider your entire financial profile. We also never require collateral. Our loans have no points, no closing costs and no additional upfront fees. Before putting your home on the line with a hard money loan, check out LoanNow!
