Because Colorado Hard Money Loans are private loans that operate outside the traditional banking system, we get this question a lot around here: will a Colorado Hard Money Loan affect my credit? Let’s break it down as clearly and succinctly as possible.
The answer to this question comes down to the differences between a conventional bank loan and a Colorado Hard Money Loan. When you get a common mortgage or loan through the bank, they will run your financial life through a system of checks to see if you’re the type of person who will pay the loan back. This will include peering into your bank account to make sure you’ve got enough for a sizeable down payment and looking at your financial history to make sure you haven’t had any major blemishes. The folks at the bank will also run a credit check to look at your score and see if you’ve had a short sale, bankruptcy or foreclosure in the past. If you have, or if your score doesn’t pass muster, they’ll reject you flat out.
When they check your score, your credit will take a small ding, typically in the range of five to 10 points. If you end up defaulting on the loan, your credit score will take a major hit and it could haunt you for years to come.
Loans from Colorado Hard Money Lenders work differently in several defining ways. For one, they’re offered by private investors so there aren’t any major regulatory hoops to jump through. More importantly for our purposes, they’re secured by collateral. This means that the lender knows he or she will be able to recoup a loss in a worst-case scenario. Because of this, lenders aren’t as concerned about credit scores and past histories. In fact, some may never even check your credit score, meaning you wouldn’t even take the small hit you would from a bank.
If you fail to pay back a Colorado Hard Money Loan, the lender can often take action. First, they would probably try to work with you. Barring that, they can foreclose on the property. However, many lenders will also accept a deed instead. It’s an important distinction — in the case of a foreclosure, your credit will be affected. With a deed, your credit will remain untouched.
If you’re thinking about going the hard money route, you’ll want to find out as much as you can first. We’re here to help. Give us a call or chat with us online at any time to find out what type of loan will work best for your situation.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.