There are several different ways you can acquire quick financing options with no credit checks if you are a real estate investor. Let us elaborate.
Hard Money Loans Vs. Bridge Loans
You might have heard the term hard money loan and this is usually a loan given by private investors who judge your assets rather than your credit score, and most borrowers typically secure this type of loan by offering property up as assets. This gives the private lender what’s called an “exit strategy” if the borrower is unable to pay the loan back.
Hard money loans are generally very short term loans with a higher than normal interest rate due to the length of the loan and are usually used until normal financing can be acquired.
Bridge loans are another type of short term financing, but these can be obtained through banks; however, they become hard money loans if you can’t obtain a loan through a traditional lending company.
If you obtain a bridge loan through a line of credit or a traditional lending institution, then you can only obtain it for buying property and the property must be considered livable. That means if you are trying to flip a house that is in bad shape, then a normal bank probably won’t finance you because there is no viable exit strategy for them if you default on the loan payments.
Both of types of these loans are almost always used for buying property, but a hard money lender usually offers a lot more flexibility in payment options and usually these investors never require a credit check.
Hard money loans also give you the flexibility to get approved for several creative projects such as hiring subcontractors to do renovations on your house flipping projects or buying raw materials for a construction job.
What Are Some Common Rates of Bridge Loans
The rate of your bridge loan will vary depending on your investor, but in some cases the investor won’t make you make any payments for several months; however, you must keep in mind that even though you won’t have to make any payments, your loan will still accrue interest. You should also remember that bridge loans usually also come with an administration fee and an appraisal fee. You might also have to pay a notary fee and or an escrow fee if you’re strictly trying to use this type of loan to buy a home. That being said, have a look at some of the pros and cons of a typical bridge loan and decide if this financing option will fit your needs.
The Benefits of a Bridge Loan
- Most bridge loans don’t require you to make monthly payments for several months and this can allow you to build up extra cash flow.
- Bridge loans can usually be financed much quicker than trying to get financing through a traditional lender like a bank or other traditional financing companies.
The Cons of a Bridge Loan
- Bridge loans are typically a little more expensive than traditional financing and they usually come with higher interest rates.
- Most lenders will do more extensive research on your assets and or credit to make sure you qualify for this type of loan, especially if you are using it to purchase a second home.
- If you aren’t in a good financial situation, a bridge loan could cause you significant financial stress.
You should Try One of These Types of Quick Financing Options If..
You are looking to renovate a non-liveable home.
Need building materials or workers to finish a home improvement project.
Can’t get traditional financing through a bank.
The reasons and benefits to obtaining bridge loan financing or hard money lending are endless and these types of quick financing options can also help you get started on major projects that could have a positive impact on your income.