Bank loan interest rates are often lowered due to a hard underwriting process, but not with hard money loans. The lenders do not check your credit score and only lend to those with equity in their homes. Because these loans are asset-based, they can look past issues like income history and credit scores. They also have lower application fees. These differences between bank loans and hard money loans make them a smart choice for borrowers with low credit scores.
Bank loan interest rates are much lower than those of hard money lenders. But why are they so low? Unlike traditional loans, hard money lenders typically require a high amount of equity. In addition to a substantial down payment, they also charge a higher percentage of points. This means that the loan will cost you less in the long run. In addition, the interest charged on these loans tends to be higher.
The duration of the loan is another factor that banks use to set their interest rates. The longer the loan is, the higher the risk of default. Long-term rates, on the other hand, are generally lower than those of hard money lenders. Instead, banks look at the overall capacity of their customers to take on debt. This is done through a formula called the debt-service ratio.