No Credit Check Loans vs. Hard Money: Not the Same Thing

Bloggers and misinformed financial ‘experts’ often lump all forms of non-traditional financing together, giving the impression that they are all basically the same thing. For example, no credit check loans and hard money loans are often misconstrued as being more or less the same. They are not. In fact, it is not even close.

The biggest difference between no credit check and hard money loans is the customers that the loans are intended for. No credit check loans are personal loans offered to consumers to cover personal expenses. Hard money loans are almost always commercial loans made to businesses, real estate investors, property flippers, etc.

The very nature of the people who take out the loans dictates many other differences. To say the two are the same thing is to do an injustice to both. To say they are similar is equally foolish. No two forms of lending could be as drastically opposed as no credit check and hard money lending.

A.K.A. Payday Loans

For the record, no credit check personal loans are essentially payday loans. It is just that we use this new term (no credit check loans) because ‘payday loan’ has bad connotations attached to it. We have changed the name to make the loans more palatable. As for the loans themselves, little about them has changed over the last 20 years.

A payday loan is a personal loan made against a person’s paycheck. It is a short-term loan intendant to be paid off when the borrower gets their next check. For all intents and purposes, a payday loan should never have a term of more than two weeks, unless a borrower only gets paid on a monthly basis.

How They Work

All a borrower needs to do is present several paystubs to the lender along with a loan application. The paystubs act as proof that the borrower has a steady job and the income to repay what is borrowed.

In nearly every case, the borrower must pay back the loan upon receipt of their next paycheck. If they cannot for whatever reason, the only recourse is to roll that balance into a new loan. Do this enough times and a borrower can find themself in over their head. Every rollover brings a higher interest rate and an additional fee. In all adds up pretty quickly.

More About Hard Money Loans

Hard money loans are private loans made by companies like Salt Lake City’s Actium Partners. They are also made without any credit checks. But here is the difference: borrowers have to offer collateral as backing. According to Actium, the vast majority of hard money loans go to real estate investors. The properties they purchase act as collateral for their respective loans.

How They Work

A hard money loan is a short-term loan that can range from 6 to 24 months, on average. In some cases, borrowers pay nothing until the loan is due. In other cases, they make regular interest payments followed by a balloon payment to cover the principle on the maturity date. Should the borrower default, they are usually given 30 days to bring things current before the collateral is taken by the lender.

It should be clear that no credit check payday loans and hard money loans are not the same thing. The two types of loans are intended for two distinct types of borrowers. Different rules govern each one. Most importantly, no credit check payday loans are risky to the consumer. They should be avoided at all costs.