It is not yet the end of the world, when you have a bad credit behind you and a few banks turn you down, don’t lose hope. It is difficult, but emerging from the situation is not impossible. One option is to borrow from hard money lenders, but the fees and rates for these loans are often very high. To work your way into these loans, you have to know their financial impacts, here are some of the things you can consider when applying for a hard money loan despite a bad credit.
Have a Cosigner Involved
One of the best ways to get through a bad credit history is to get a good cosigner. When you have a cosigner, the attention shifts to the cosigner’s good credit history instead of yours, increasing the chance they would strike a deal with you. Another advantage of having a cosigner is your chances of having lower interest rates increases, how? Lenders base the interest rates on the risk they feel they are taking, since the attention is on your cosigner’s good credit, the perceived risk is lower and so are the interest rates. What you want is a cosigner with a good credit history, have one involved and you increase your chance of getting a loan.
Buy a Property with a High Value
Most often than not, lenders pay attention to the property you plan on purchasing rather than your personal or credit history. In this case, they would be eager to know what you plan to do with the property. Lenders do know that paying attention to properties involves the risk of default, so what they want is to get involved in deals where there’s a good chance their money would return. When the odds of selling the property are increased when it goes default, the more likely they would give the loan, even if you have a bad credit.
Consider Taking Low Loan-to-Value
If you want to take loans from a hard money lender, you must be prepared to take on a low loan-to value ratio. What this means is that you have to come up with a way to get more cash out right from your own pockets to get financing, you have two options: save the money or get it from other financial sources. A 50% offer of the money that you need is a common practice for lenders, especially after they’ve evaluated your credit and risk. Giving low loan-to-value ratios decreases the risk on their side.
Let’s have an example, say you are borrowing money to purchase a property worth $200,000. Hard money lenders would give you $100,000 and a right for foreclosure in case the property goes default. If the value of the property decreases, the lending company can still sell the property for $100,000 and they can still get their money back.
This assures them of a return of investment. But even if situations turn for the worse and they cannot make significant returns, the company would still get their initial investment, at least. For faster loans and cash payments one can look at https://txtloan.co.uk.