Creative financing

What is creative financing?

Creative financing is an innovative or unusual way of structuring a loan that allows a person to buy a home, land or some other major item.

Deeper definition

Creative financing happens when a loan is put together in a different, unusual, or innovative way to create a circumstance where a person with bad credit or an unfavorable credit history can buy a home or other real estate. This usually means arranging things like long-term loans and unique credit repayment plans to obtain the buyer financing that he wouldn’t usually be able to get. A creative financing agreement usually comes from a third-party lender or financial institution and is seen in many different forms of loans and financing.

Creative financing example

If an individual with lackluster credit is looking to buy a home or business, a third-party institution may grant him an extended loan, line of credit, or other type of creative financing in order to make the purchase possible. In most cases, part of the goal of creative financing is for the buyer to avoid having to use too much of his own money. Instead, he uses techniques like leveraging, hard-cash loans, long-term loans, and other financing techniques to place a down payment or to purchase a house, business, piece of land, or other large item.

One of the most common fields for creative financing is real estate. You see it used most often when someone tries to buy a home but does not have the credit to get a mortgage or the cash to make a sufficient down payment. This is where third-party loans and creative financing can help.

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