Hard money loans. Perhaps you’ve seen them on TV. Or heard about them from a friend or neighbor. Or perhaps you’re merely familiar with the name, but don’t know much about them. If so, you’re no different than millions of other Utah residents.
Hard money lenders have earned a bit of a bad reputation in recent days, and it’s not entirely undeserved. Generally speaking, they come with fairly high interest rates—an estimated 14.6% in Utah alone. That’s over three times higher than the average interest rate of 4.23% on a 30 year fixed mortgage nationally. And one of the major drawbacks from hard money lenders can actually be one of their greater values.
Unlike traditional loans, a hard money loan is secured by physical assets as opposed to your credit—most typically, a home, RV or other valuables. For people with bad credit, the exorbitant interest rates can be a blessing in disguise. Hard money loans are typically easy to come by, and eligibility rarely requires much more than physical collateral. They’re meant as a short term solution, mainly for temporary financial setbacks which can be easily mended within a year or two of stability.
But while many hard money lenders are offering competitive rates, they can sometimes have less flexibility in payment options. And sometimes, higher standards of eligibility. To take out a hard money loan at an interest rate of 6.89% (as opposed to the 14.6% in Utah) might seem like an amazing deal. And it is. If you qualify. But what if the terms require repayment in 9 months as opposed to two years? It all is dependent upon your situation and the purpose of needing the funds asap.
We took a look at some of the more popular national lenders and decided to review their offerings. If you’re a Utah homeowner who’s potentially looking at a hard money loan, here’s what we found.
LendingTree is frequently one of the first names that comes to mind when people think of hard money lenders. Except… they’re not actually a lender. Instead, they’re an exchange marketplace that connects borrowers with both local and national lenders depending on their needs. With this in mind, let’s look at some of the pros and cons.
- Simple online application process
- Consolidated access to multiple lenders
- Active competition from lenders for your business
- Repeated phone calls and emails from lenders and financial institutions
- Inability to give a specific APR or loan amount
- Many users have reported both hard and soft credit pulls as a result of simply filling out an application online
LendingClub tends to attract a fairly diverse customer base, but more frequently than not they’re a hard money loan source for individuals with fair credit history and a relatively high income. However, they also provide services including debt consolidation and joint loan applications which are unavailable elsewhere; in particular, a temporary hardship plan which allows first time borrowers three month’s interest free payment.
- Minimum credit score of 600
- Debt-to-income ratio of less than 40% for single applications, 35% for joint applicants
- Monthly repayment options between three to five years
- Diverse service offerings
- Typical APR between 6.99 – 35.99%
- Loan cap of $40,000
- Credit and income data define eligibility. In particular, LendingClub uses a “grade” based on both factors which is only visible to investment companies (including private investors) willing to fund you
Avant specializes in individuals with both bad and new credit; in particular, borrowers who are looking at debt consolidation as an alternative to multiple payments. Payment options have been known to be relatively flexible, and low income eligibility requirements have helped make Avant just as applicable for individuals facing temporary financial instability as individuals consolidating their current debt
- A minimum $20,000 gross annual income
- A credit score as low as 580
- Low eligibility for approval
- Fast turnaround (often in the next business day)
- APR between 10.99 – 26.99%
- Loan amount cap of $35,000
- Soft credit pulls
- Numerous customer complaints of additional hidden charges and fees
Upgrade’s chief appeal is in their personal line of credit program, which helps allow borrowers to consolidate high-interest debts at minimal monthly cost. However, they are fairly strict on relative cash flow, requesting applicants have a minimum of $800 left over each month after bills. But with comparatively low interest rates and minimal credit requirements, Upgrade might just be the option you’re looking for.
- APR between 7.99 – 35.99%
- No minimum gross annual income
- 24 hour turnaround
- Minimum credit score of 620
- Negotiable payment plans
- Personal lines of credit up to $50,000 at a 36 month fixed rate
- High demands of free cash flow ($800 being the minimum requirement)
- Reportedly difficult to qualify for lower income borrowers
- Maximum debt-to-income ratio cap of 60%
Upstart can seem like a great choice for many—even if you’re entirely unfamiliar with the name. Loans are quick, credit eligibility is low and the APR is one of the lowest we’ve seen for individuals with bad credit. But for those of you have an established credit history? There’s a few catches. For one, you can’t have any recent history of bankruptcy or delinquent payments and fewer than six inquiries on your credit report in the past six months. Which may be hardly realistic for many individuals with bad credit. But assuming you qualify for those criteria, it may be an ideal solution for you.
- APR between 7.69% – 35.89%
- A minimum credit score of 620
- Fast loan approval of 24 hours
- Minimum annual income of $12,000
- No credit history necessary
- Eligibility requirements for borrowers with a credit history include no recent history of bankruptcy or delinquent payments
- Maximum debt-to-income ratio of 45%
- Applicants with a poor credit history have reported high rejection rates