Identifying Money lending Frauds

Identifying Money lending Frauds

You may have analyzed your financial situation, the requirements for a traditional bank loan and the possibilities of rejection and now you have decided to approach a private money lender. However, there are a plethora of private and hard money lenders in the current market and finding the right trustable one is important to save your money.

Private Money Lenders Can be Found in the Following Ways:

  • Internal search/online surfing is the most popular way to find a business. Private money lenders are no exception. Most money lenders have built a network and have uploaded all their procedures and contact information on the website.
  • People from your close acquaintance such as friends, family, or neighbors may be interested in real estate and they know much about the field. They are willing to invest their capital. You can work with them for a win-win situation.
  • Try approaching the lenders by enrolling in real estate investment clubs.
  • You can get a few contacts from local brokers and contact them through calls or emails.

How to Identify a Private or Hard Money Lending Scam?

Below are several warning signs you can notice if you are keenly watching every step of the investment:

Low interest rates:

Lenders who pose very low interest rates such as 5% are definitely on the flagged list. Generally, most lenders offer an interest rate between 10% and 15% based on the current federal interest margin. So, interest rates posed below 10% should be checked for frauds.

Upfront fees or demanding a payment card:

If a lender asks you to pay a huge payment upfront in the names of “administrative” or “application” fee, it must be a scam. Reputed vendors still ask you for a processing fee but that will be a minimum amount for liability.

Some fraudulent lenders ask you to provide credit card or debit card information in the name of processing. Do not provide them. They use your card information for money scams.

Fancy unbelievable ads:

  • Offering 100% funding – Lenders who call you and offer full funding for your property value, then it is a scam. Most lenders give a loan for 60%-70% of the property value.
  • Huge loan amounts – If you see a fancy ad stating a loan amount of over a million or more at a 5% interest rate, then it must be trashed as a scam.
  • No documentation required – No validation of credit score, income and financial strength is a warning sign. Because private or hard money lenders provide their hard-earned capital as loans, so they need some liability.
  • No property evaluation required – Successful private lenders evaluate the property information, validate its value, visit the property in person and quote a loan and interest rate based on the value. If someone guarantees you a mortgage without property evaluation, then it is a red flag.

Not sticking to the terms:

If lenders guarantee a certain loan term such as the good funding value and low-interest rate, in the beginning, to attract you and then change their terms later by increasing the value, then they should not be trusted.

No follow-up or replies:

Some people pose themselves as lenders and collect all your real-estate information and then use those details for a future scam. This is identity theft. Once they make the initial call to collect the details and vanish without getting back to you or not answering your calls.  

No valid physical address or suspectable website:

Illegitimate money lenders will not provide a valid physical address, they try to convince you by giving reasons. Trusted companies and associated lenders will have a secure website with a URL starting with “https://” and a lock symbol. When you traverse their website if a warning pops up that it is insecure, then you should immediately unfollow them.

Continuous pressure to act immediately:

Lenders who constantly call you and pressurize you to decide quickly before too late are  to be blocked. Reputable vendors will give you time for a week or two to decide.

Lender not registered in your state:

FTC (Federal Trade Commission) requires that a money lender should be registered in the state in which they do business. E.g., top rated private money loans South bend, IN should be provided by a lender who is registered in Indiana.

Guaranteeing a loan over the phone:

Legitimate vendors will validate the documents and come to a loan agreement and guarantee you in person. If you hear someone over the phone confirming your loan, then you should not believe it.

Asking you to send funds/interests directly to the lender:

If a lender found online asks you to transfer the principal funds or interests to his/her private account than a corporate account, then you have to reconsider your decision.

How to Prevent Falling for These Scams?

  • Try to find a lender through a word of mouth from a known circle or through references. Your friends might have worked with a private lender in the past and would have been satisfied.
  • If finding online, check for reviews of the lenders online. Specifically, search for positive feedbacks and complaints so you will get a good idea. You can also use terms like “Lender name” “Company name” + “Scams”. If there are past scams with these lenders, then you could locate a bad review.
  • Ask the lenders about their parent or title company and their successful clients and do some research browsing about the title company and check if lender information is listed.

Worried too much about scrutinizing an array of money lenders for top rated private money loans South bend, IN? We, BridgeWell Capital, are here to help you solve your loan problems with most care. We have a trusted website URL and we are available on all social media platforms to answer your queries. We have an all-day online Chat service to address your issues. Our instructions are clear and we work with you on a timely basis.