Hard Money Loans for Bad Credit – How to Easily Access Home Equity

Hard Money Loans

Yes, hard money loans for bad credit home owners is possible. In fact you’d be surprised that hard money lenders don’t care at all about your credit, and most times they don’t even look at it!

Qualifying for a hard money loan can be an excellent alternatives to refinancing and home equity lines of credit. Hard money loans are quick, short term loans designed to help you immediately and can be for the long term too.

There’s zero to minimal income verification and offer flexible loan options which can frequently be customized. And if you’re looking to purchase a new home, a hard money loan allows you to borrow against any home currently for sale.

What Is A Hard Money Loan?

You may have heard hard money loans referred to as a “last resort” loan and felt immediately discouraged by its connotation. You shouldn’t be. A hard money loan is simply another term for a short term loan designed to bridge any gap for your immediate needs and provide you with funding based on the some type of tangible collateral such as your house or property. Not your credit score. Not your income. But the value of your house/property.

Hard money loans are offered in lieu of traditional loans by either private investors or smaller consumer lenders since terms (while frequently much more flexible than traditional loans) usually demand they be paid back in a shorter period of time—and at higher interest.

Since lenders in Utah are subject to both Utah state and federal regulations which bar lending to homeowners who do not have adequate means of repayment, the amount of a loan which is predicated on your overall equity tends to be an attractive alternative for many people who find their credit is less than perfect.

Private Home Equity Loans with Bad Credit
(Pros and Cons)

If you find yourself unable to pursue traditional loans, either because of bad credit, income or lien history, you may find a private home equity loan to be the perfect immediate solution. In fact, many private hard money investors have been in similar situations. And they know perfectly well how unsympathetic many banks are.

Private home equity lenders are not faceless entities following standard protocol and regulations behind a computer screen. They’re people just like you, who have simply been able to dig themselves and others out of the financial dilemmas they once found themselves in. And because they’re people like yourself, they can offer much greater flexibility in repayment options than traditional financial institutions.

But lending is still a risky venture. Like anything else in life, the guarantee of repayment on a private equity loan can’t be taken on good faith alone. Which is why a lender can’t always be the easiest investors to find. But not only is your property subject to resale should you default on your loan, payback terms can be frequently shorter.

Depending on the size of the loan and your given situation, it can be three months or potentially three years; although, as noted, borrowers can frequently renegotiate—although it may require higher interest rates. Speaking of which…

Interest rates for hard money loans are typically much higher than traditional lenders. In Utah, the average interest rate has been estimated at 14.6%, compared to 7.00% offered by traditional mortgage refinancers. Since a hard money loan is a short term loan designed to assist you for an immediate situation (most hard money lenders will grant approval in 2-4 business days) this may be why they’re so frequently referred to as a “last resort.”

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  • Low Credit Requirements

The equity of your home is the decisive factor in a hard money loan—not credit history or income requirements.

  • Speed

Most hard money lenders will approve your loan in as little as 2-3 days.

  • Greater Negotiability in Repayment Options

With a hard money loan, you can actually use collateral from other properties you currently have for sale. Terms are subject to both your given situation and the value of your home.

  • Ideal for Short Term Solutions

Particularly if you’re looking to purchase another house with plans for renovating it for future sale (or “house-flipping.”) But if there’s a pressing medical bills, divorce or any other costly dilemma, hard money loans may be more ideal for you compared to traditional bank loans.


  • Higher Interest Rates

As noted, sometimes interest rates can reach approximately 18 percent—and that’s not ideal for many people. But since most people applying for hard money loans are only going to be borrowing for 6 months to 1 year, it may ultimately be much lower than you’d think.

  • Short Term Solution

Remember, this is a bridge to help you get out of an immediate gap. Hard money is not a long term solution and should definitely be thought of as a temporary cash flow source.

  • Scarcity

While hard money lenders are becoming increasingly more visible, they still have neither the time, presence or marketing departments as traditional financial institutions. You may find shopping around for the most ideal rate will be fairly limited.

Are Hard Money Lenders Reputable?

For the most part, yes. They may be private investors, but they’re just as much subject to legal regulations as traditional lenders. And even more scrutinized. Hard money lenders are still commercial entities. And no commercial entity wants to face prosecution—especially an alternative lender.

But with any legally binding agreement, review the contract carefully; with an attorney, preferably. Make certain there are no loopholes designed to take advantage of you if you’re considering a hard money loan. And always ask about the negotiability of available terms.

Securing a Hard Money Loan with a Second Mortgage with Me

As an experienced real estate investor I am also a hard money lender and will guide you through the process of securing a hard money loan with a second mortgage:

1. Evaluating your home equity

I will help you determine how much equity you have in your home by subtracting the outstanding balance on your primary mortgage from your home’s current market value.

2. Fast and Reliable Lending

I offer a level of trust and reliability that you may not find with unknown third parties. By working directly with me, you can avoid lengthy waiting periods often associated with traditional lenders.

3. Preparing Your Application

I’ll assist you in completing the loan application, providing details about your primary residence, the amount of equity you have, and the purpose of the loan. I will also help you gather the necessary supporting documentation, such as proof of income, property appraisal, and a detailed description of the real estate project or purpose for which you need the loan.

4. Property Appraisal

I will coordinate the appraisal of your primary residence to determine its current market value and the amount of equity available to secure the loan. This appraisal will be a critical factor in determining the loan-to-value (LTV) ratio, which affects the loan amount and terms.

5. Loan Approval and Closing

Once I have reviewed your application and conducted my due diligence, I will decide whether to approve your loan. I will guide you through the loan agreement process, outlining the terms, interest rates, and fees associated with the loan. Upon signing the agreement, I will place a lien on your primary residence, which serves as collateral for the loan.

Ready to talk? Click here and let’s discuss your situation.

What About a Home Equity Line Of Credit (HELOC)?

Approval for a home equity line of credit (or second mortgage) will vary dramatically from lender to lender. Even in Utah, which tends to follow national standards. Typically however, the average qualifying minimum for a home equity line of credit can include:

  • A debt-to-income ratio of 43 percent or less
  • A credit rating of at least 620 (and preferably higher)
  • A home value of at least 20 percent more than any debt you currently owe

If you think this sounds like a balancing act, it is. Lenders are notoriously fickle about specifications for second mortgages—even with good credit. And while you may wind up meeting the above bare minimum, approval is not guaranteed. Nor is your borrowing limit.

Obtaining a Secured Loan With Bad Credit

Depending on the amount you currently have invested in savings, you may be able to qualify for a secured loan through a traditional lender. While these can sometimes have the advantage of a lower interest rate than home equity lines of credit, there can also be certain disadvantages.

For one, you’re still committing to a long term fixed payment; and given the severity of your circumstances, this is not necessarily going to be a realistic option for many of you (particularly in cases larger expenses.) But also keep in mind that these can only sometimes have lower interest rates. A general rule to keep in mind with any lender is that the lower your credit score, the higher your interest rate will be. And if your credit is hovering in the 620 – 690 range, you’ll likely find interest rates to be even higher than with a home equity line of credit.

If you’ve had a previous lien placed on your property, your chances of finding a secured loan will be slim at best even if you managed to have it lifted. Lenders are taking a gamble when securing loans for homeowners who have faced the threat of foreclosure. More often than not, they’re not willing to take similar risks in the future. Even though it might seem to be in their benefit to sell a property, the return usually winds up being drastically less than the initial refinancing.

Alternative Lenders – Peer to Peer Lending

There’s been a surge in the visibility of alternative lenders over the past fifteen years, particularly since traditional resources such as banks and mortgage financing providers are growing increasingly more inflexible in approval rates. The actual definition of alternative lending is extremely loose, but for the sake of convenience think of them as any lending institution outside of a full scale FDIC-approved financial institution. And while the definition is broad and encompasses anything from instant payday loan providers to well established lenders such as Lending Tree, Kabbage and loanDepot, the question is are they the right choice for a second mortgage?

For many homeowners with bad credit, it can seem like an ideal choice. There’s a much higher chance of approval and sometimes, even more competitive interest rates. But there’s still the risk of foreclosure. Legally, even non-bank entities have the right to foreclose—even in instances of a second mortgage. You’re still offering your property as an asset. And neither home equity lending ability nor approval is guaranteed (particularly with lower value homes.) More importantly, many are fly by night scams; particularly ones which charge fees for pre-approval. Remember, they’re not always FDIC-approved. Practices can be entirely mercenary. When in doubt, review their accreditation and certification. If something seems suspicious, more frequently than not your fears are entirely justified.

3 Alternatives To Traditional Lending Institutions

You’re not alone if you’d prefer not to wait for approval or pay exorbitant interest rates. There is good news however for homeowners wanting to stay in their home while trying to access equity with bad credit. Consider.

1- Your Local Credit Union

Believe it or not, even with bad credit, your credit union may loan you money based on the amount of equity in your house. This should be your first call. 

2- Finding A Trusted Credit Partner

The key word here is “trust.” If your credit score is preventing you from finding a qualified lender to help you access your home equity for any reason you could have a friend help you. It’s best to have a real estate professionally work with you if you were to walk down this path. It is however a very viable solution to help you stay in your home and still access the funds you need to help you get back on your feet financially.

3- Crowdfunding

Though it may seem like a long shot to rely on crowdfunding via platforms such as GoFundMe  or Kickstarter to help raise funds for a down payment on a second mortgage is also possible. With a little persuasive sales skills & marketing you could find a number of people willing to donate to your cause!

While crowdfunding is not usually going to give you a huge influx of funds to stop creditor harassment it can add up. If your situation and story is compelling enough you could however raise the donated funds in a matter of days or weeks. You never know until you try.

4- Go With Your Trusted Local House Buyer

The two previous options of accessing your equity, while creative and viable, might be just too much for you to take on and implement at this time. If that is the case reach out to us here at Gary Buys Houses. We are you local, Utah house buying company who you can trust to work out the right thing with you. We’re not just in the business of buying houses. We can also help you with refinancing your home equity, as well. We know how hard it can be to borrow equity with bad credit. That’s why we established our Sell Now Move Later program. We created that program for the purpose of helping people in your exact situation. If you are in a financial rut and want to stay in your home  we can help. Despite having bad credit we can make the whole process very simply and fair to you. We’ve helped hundreds of homeowners find an ideal solution to equity access dilemmas over the years. Why not let us help you as well? Contact us here.

Gary Parker

I was a part owner in an electrical contracting firm in the late 1990’s and started to get interested in real estate around 2001. My business partner and I bought our first rental property in 2002. From there we did several real estate transactions until we decided to close the electrical business and part ways. In 2009 I started Gary Buys Houses which is owned by my wife, Eileen, and I. I felt like I could offer one on one personal service to people that wanted to sell their house quickly or not worry about repairs and such. Today, I have built a reputation of being fair and honest with people no matter their situation, so the business continues to help people and be successful. I have been married for 34 years, and have one son, two step sons and 4 grandchildren. I like to travel and spend time in Southern Utah exploring. https://www.garybuyshouses.com/

2 responses to “Hard Money Loans for Bad Credit – How to Easily Access Home Equity

  1. Can we get a 2nd mortgage without needing our credit score…we were late on our car loan which dropped our score by 100 points.we have equity in our land and home.

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