Cryptocurrency has skyrocketed to widespread popularity.
Although more people have it, many people don’t know that they can use their Bitcoin assets to get approved for a loan. More specifically, Bitcoin can be used as an asset in securing a hard money loan.
You would not be using Bitcoin itself to pay for a loan but just prove that you have crypto assets to qualify for the loan.
In a hard money loan scenario, the property is typically used as collateral for a loan from the private lender. However, Bitcoin could be used as a mechanism to qualify for an owner occupied hard money loan.
Let’s look at how these assets can help you secure a hard money loan.
Securing a Loan with Bitcoin
When trying to secure a loan, simply reporting all of your assets (including crypto assets) gives a lender a more complete picture of your net worth. This helps them determine how risky of a borrower you are.
Assets you have are defined as cash, cash equivalents, and property — not the ongoing income that you earn. Bitcoin is a nonphysical asset that, with a little planning, can be converted to cash.
Despite its growing popularity, the conventional mortgage industry is slow to adapt to the possibilities of Bitcoin.
Fannie Mae recently stated that Bitcoin could be used to secure a mortgage loan, only if there is a full paper trail in place. With a traditional lender, you will need paperwork to back up all of your claims and investments. This includes documents to prove the purchase and sale of your Bitcoin, adding another hoop for you to jump through.
While a few conventional lenders allow Bitcoin use for down payments, you may not be able to use your Bitcoin assets to help you qualify for the loan.
There is a lending alternative that is more open to non-traditional currency like Bitcoin. Since hard money loans are based on assets, you might have better luck with that route.
What’s your loan scenario?
Bitcoin and Hard Money Loans
We are only just now seeing traditional lenders begin to embrace the idea of Bitcoin, but hard money lenders, or private money lenders, operate on the basic idea of collateral assets for lending. If you think about it, Bitcoin and hard money really go hand-in-hand.
With that in mind, if Bitcoin is one of your biggest financial assets, you may want to consider a hard money loan for your needs.
The process of using Bitcoin to get approved for a loan will be much simpler and quicker with a hard money loan. While conventional loans may ask for a complete paper trail of purchases and sales, a hard money lender will simply consider the value of your assets.
In a hard money loan scenario, the borrower and the lender negotiate their own terms together. This means that there are fewer strict requirements, and certainly less paperwork, such as those required by a bank or conventional lender.
This is especially helpful for those who don’t have a perfect credit score, have non-traditional income, or have had judgments on them in the past. A strong collateral base, which can be made up of Bitcoin, can help the private money lender understand your financial situation and know that you will be a reliable borrower.
Hard money loans are also based on the value of the deal and whether it makes sense for all parties involved.
If you’re bringing a valuable amount of Bitcoin assets to the table, this will likely please your lender and can convince them to work with you.
You can then get your foot in the door of real estate investing. Hard money lenders will likely want to continue to work with you if you prove to be a good borrower. Use your Bitcoin assets to establish a strong relationship with your hard money lender to make future deals go smoothly.
Who Benefits from Bitcoin-Backed Deals?
Private money lenders specialize in unique situations that don’t necessarily fit into the requirements of a conventional loan lender.
Particularly if you are an entrepreneur or professional trader, you may have a hard time proving to a bank or traditional lender that you are a reliable borrower, have a steady stream of income, and are not a risk.
For that reason, hard money loans are ideal for the following types of borrowers:
- Real estate investors
- House flippers
- Multifamily properties
- Investment properties
- Bridge loans and new construction loans
- Business owners
- Borrowers purchasing or refinancing their primary residence
- Self-employed borrowers
Particularly for borrowers who fall into the last bullet point, Bitcoin will help you prove your asset value and provide collateral for your loan.
Pros and Cons of Bitcoin Assets
While there are risks, you can still come out on top of the deal with Bitcoin.
It is a risk to use Bitcoin as collateral just because of the nature of the volatile crypto market. The price of Bitcoin could plunge and leave you without the same amount of collateral that you originally planned for.
However, by using Bitcoin to invest in real estate, you can diversify your assets by adding property investments to your portfolio.
That’s why the swiftness of hard money loans can be used to your benefit as an investor. The quicker that you can capitalize on your Bitcoin gains and use it to secure other capital, the better.
Marquee Funding Group Will Work With You
Speaking of swiftness, for Bitcoin investors, these are just some of the perks of working with a hard money lender like Marquee Funding group:
- Same-day approvals
- Closing in as fast as seven days
- Common-sense underwriting
We know that you want to take advantage of your earnings through Bitcoin assets as soon as possible. If the deal makes sense to us, we will work with you.
Your situation is unique and requires a unique solution.
Submit your loan scenario to Marquee Funding Group and one of our experienced loan officers will get back to you as soon as possible to see how we can work together.