Real Estate Tips |5 min read

Reliable Hard Money Lenders vs. Predatory Lenders

Hard money loans can be a fantastic option for investors, but only if you choose carefully. After all, not all lenders are a good fit. It’s essential you know what to look for so that you’re less likely to be taken advantage of. Fortunately, there are simple ways that you can spot potentially predatory lenders.

9 Ways to Avoid Predatory Lenders

As hard money lenders in Maryland, we operate ethically and transparently. Industry leaders like us can identify some of the most common methods that indicate a hard money lender’s reliability. Below we share some of the techniques we’ve gathered over the years to help you find a reputable lender for your next investment.

  1. Read Reviews of Hard Money Lenders
  2. Peek at the Loan Provider’s Website
  3. Look at Regulator Resources
  4. Check How Long the Lending Party Has Been in Business
  5. Make Sure Your Company Has Transparent Communication
  6. If it Seems Too Good to Be True, It May Be
  7. Avoiding Scammers
  8. Meet Lenders Face-to-Face
  9. Go with a Proven Hard Money Loan Expert

Read Reviews of Hard Money Lenders 

Every time you try out a new service or product, you should read client reviews. Hard money lenders aren’t an exception. Personal experiences matter, and they will give you a glimpse of what you could experience if you got involved with a business.

Any hard money lender worth their salt will have a website that displays client feedback. You can use this feedback as a jumping point to narrow down hard money lenders with good reputations. And on that note, you also should…

Peek at The Loan Provider’s Website

Your hard money lender’s site should be polished and professional. Lenders with disorganized websites and spelling or grammatical errors are concerning. Similarly, if you can’t find any information about anyone associated with the business, that stands out as a red flag.

Look at Regulator Resources

Each state’s Attorney General’s office provides information about notable predatory lenders. This is something you should check out. Additionally, while not all businesses use the Better Business Bureau website, any business that has a decidedly poor Better Business Bureau rating deserves a red flag. Easiest of all, Google is your friend for finding reviews. You can often find client testimonials in Google company listings. This way, you can have concrete evidence that a business could be trustworthy or not.

Check How Long the Lending Party Has Been in Business

When you ask your hard money lender essential questions, such as their history, you can get a feel of what their level of knowledge and reliability look like. Because of that, you should look for lenders with proven track records of success and legitimacy. Why go through the pain of trying an untested field player when you can just use an established expert?

Legitimate lenders should be able to show off their work history. They will be able to display their portfolio. Critically, they must provide you with real references and results. If the lender in question will not hand over this information, it’s time to pause and rethink their eligibility. For instance, if their foreclosure rate is abnormally high, that should be reason for concern. Do more deep thinking and hard money lender background research before you agree to anything. Most importantly, always trust your gut instinct about what feels right and suspiciously amiss.

Make Sure Your Company Has Transparent Communication

One big red flag is a hard money lender that is not transparent about its fees. If your lender springs upon its clients sudden fees without forewarning, that’s a warning sign. For example, we state explicitly on our website that our costs start at 12% and 3 points. Trustworthy lenders should give you similar upfront information about what you will owe them. Legitimate lenders will not shy away from your questions.

If it Seems Too Good to Be True, It May Be

Any deal that seems suspiciously easy may be too good to be true. Doss has observed that lax lenders with little screening criteria, who accept just about any borrower may be predatory. A reputable institution should have operating standards. If a lender accepts a borrower with insufficient documentation, that can mean they are not discerning or careful. Or, even worse, they could be a scam, which we’ll elaborate on below.

Avoiding Scammers

Unfortunately, there are many fake hard money lenders out there waiting in the shadows to prey upon your enthusiasm as an investor. You can find many of these scammers on LinkedIn, Facebook, and other social media sites. They can craft fake profiles to lure you in but don’t be fooled. Such friendly-looking faces are masks for a greater scheme at play. They will jump through hoops to convince you to give them your hard-earned money.

Scammers may generate a made-up obstacle that prevents borrowers from getting their deal to the closing stage. Conveniently, this problem can be resolved by funneling yet more money their way. Over and over, rinse and repeat. In many cases like this, if the prospective borrower continues to share funds, the fake lender will take all that money without ever holding their end of the deal. This could cost you upwards of thousands of dollars.

Meet Lenders Face-to-Face

It’s always good to see hard money lenders in person at their office. After all, there’s a lot of information you can garner from the little details you experience yourself. For example, if the lender’s premises are unkempt or their representatives have an unprofessional, slovenly demeanor, that signals that that lender doesn’t have its functioning in order.

Go with a Proven Hard Money Loan Expert

Now, you have the power of knowledge. You have tools to better discern what makes a good hard money lender or a predatory lender. Your careful judgement can prevent heartbreak and lost dollars. After all, lenders screen borrowers, so it’s only natural that you should be able to screen them right back.

If you’re in Maryland and are looking to finance a real estate investment project, Maryland Hard Money Lenders (MHML) can help. Rest assured that we understand the stakes of your hard money loan and can provide you with the guidance you need throughout the entire process. Call us today to make your real estate project come to life.

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