Signs It’s a Hard Money Scam
A hard money scam company will attract hopeful investors with rates and lending practices that sound too good to be true.
To easily spot a rip off, ask yourself these three questions about a lender:
Question 1: Are their rates waaaaay too low?
First of all, if a hard money lender doesn’t clearly post their rates, run.
That being said, interest rates on a hard money loan should be between about 12% and 18%. In cases where the investor has really good credit, you might see rates as low as 10%. And there are always additional fees with every loan. We disclose all of our fees upfront.
Beware the Bait and Switch Technique. Some dishonest lenders know exactly how to trick their investors, by enticing them with extremely low interest rates to get them in the door. After assuring the investor that they’re getting a great rate, they wait. When the deal is about to close and all the paperwork signed, this unethical lender will greatly increase the rates in their contract to much higher than normal. At that point, the investor, having everything all set up for the deal and not enough time to find a new lender, will likely agree to the inflated rates.
Question 2: Do they approve loans WITHOUT evaluating the property?
Legitimate hard money lenders will assess the risk involved in a loan before finalizing the loan approval. They usually do this by performing:
- a thorough analysis of all of the loan application details (which takes a couple of days), as well as
- a physical evaluation of the investment property
Because hard money lenders are already lending in higher-risk situations that traditional lenders won’t touch, it would be insane for a real lender to give money to people without first doing their own homework on the deal.
So if a hard money lender approves your loan without some kind of analysis or evaluation of the subject property . . . something is seriously fishy.
Question 3: Do they claim they will fund ANYTHING?
An honest hard money lender will always have to turn away applications for deals that look too risky. That’s just the way it is.
Rip off lenders try to lure investors with outrageous claims that they will fund every deal.
The DoHardMoney website says “Every Good Deal Gets Funded Guaranteed.” And that’s exactly what we mean, every good deal.
Signs a Lender is Legit
Customer Reviews and Testimonials
- When hard money lenders do their jobs right, they help investors make money. I don’t know if you’ve noticed, but helping people make money makes them very happy.
- So you can expect that a good hard money lender will have lots of positive customer reviews and testimonials on display.
- You can see DoHardMoney customer reviews here.
Responds to Customer Complaints
- Anyone who has ever owned a business knows that even the best businesses will have dissatisfied customers and negative reviews. As they say, “You can’t please all the people all the time.” And as I mentioned above, financial institutions and those lending money tend to have negative reviews because they deal with money. People don’t like to be told they cannot get a loan. But remember, when we are turning down a loan we are not turning down the borrower, we are just declining to fund a specific deal. That borrower can still go and find a deal that qualifies and get the funding they desire.
- However, how a company addresses complaints will tell you a lot about how they do business.
My Reasons for This
You might be wondering, “Why would you be teaching me how to look at other hard money lenders, Ryan? Aren’t you a hard money lender yourself?” Good questions.
First of all, there are a number of reasons why a hard money loan with DoHardMoney might not work for every investor. We get that. We don’t lend directly in every state, and, like I talked about above, we may have to turn down a deal if it doesn’t measure up to our standards.
DoHardMoney.com’s mission encompasses more than just funding deals for investors. We’re here to help investors be successful any way we can, whether through information, REI coaching or other investing tools.
If you can’t get a loan through us, I want you to get your loan safely and avoid the scam companies. Maybe we’ll be able to fund you on another deal down the road.
But, of course, I’d love it even more if I could fund you on your deal now rather than later. If you’re interested, Click the Button below to Get Pre-Qualified.
To Your Success!
Ryan G. Wright
*Update for Covid-19 Epidemic*
After the spread of Coronavirus, the U.S. economy has, unsurprisingly, stagnated. Just as with any dangerous event, there are people out there who seek to profit from the misfortune of others. Now more than ever, investors should be careful of situations that seem too good to be true. Both investors and lenders are more likely to fall into a position of desperation, where taking advantage of others seems like the solution for them. Keep your head straight, make sure to vet those you work with, and steer clear of unrealistic propositions. You may be desperate yourself, but keep in mind, there may be another desperate individual on the other end of the deal as well.