Top 4 Scams in Hard Money

Hard Money ScamsThere are a lot of bad hard money lenders
in the private money lending space. Because it is not regulated as much as the banking industry, hard money lending has its share of scam artists. Below is a top 4 list of scams to watch out for when looking for a good hard money lender.

  1. Fee Collector: When a lender asks for an upfront fee for a sum of more than $1,000 this is probably a scam. There are a lot of hard money lenders who make money from charging upfront fees, and not by actually making loans. These hard money lenders are often called, “fee collectors.” Although there are exceptions, scams in hard money are usually found when a lender is charging $1,000 or more to give you a loan. Sometimes a lender will require an appraisal or site inspection as a final underwriting condition for giving you the loan. However, in most cases, this type of upfront fee will not be more than $500 and will typically be paid for a third party service.
  2. “Bait and Switch” Lender: The lender promises the borrower a low interest rate and a low fee loan that seems too good to be true. Right before funding the loan, the lender may give the borrower a less desirable loan term, at a higher interest rate. This is called “bait and switch.”
  3. Bait and Ditch” Lender: The lender promises the borrower a loan that may seem too good to be true and then asks for a steep upfront fee, typically over $1,000. The borrower pays the upfront fee. Shortly thereafter, the lender immediately ditches the borrower hoping to get a loan, never funding the loan. This is called a “bait and ditch.”
  4. Too Good to Be True Lender: Lender promises the borrower low interest rate and low fee loan that seems too good to be true. But constant delays prevent an actual funding of the loan that are not the fault of the borrower. The process can drag on for months with promises that the loan will fund ‘next week.’ In some cases, the borrower may also have given a large upfront fee to the lender.

It is tough to find the good hard money lenders and avoid scams in hard money. So do your homework and look further than the first page of a Google search when searching for bad press on private money lender. Get testimonials from past clients and do your own research.

Posted by Corey Curwick on January 23, 2012

Corey Curwick is a Private Money Consultant for Private Money Utah, a consultancy that assists its clients to obtain private money financing.

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About the author

Corey Curwick Dutton Corey Curwick Dutton, MBA Park City, Utah - 2005 MBA Graduate with 10 years experience in Business Management including International Management. Corey is a Private Money Lender and Loan Officer. In her spare time Corey enjoys writing on topics in the private money lending industry. She also enjoys hobbies such as mountain biking and skiing in the great outdoors of Utah. Google

  1. 4 Comments

    • Lisa Watts says:

      thank you Corey, more people need to have ready access to such information.

    • Ashok Aditya says:

      Is there any possibility to find out one as a Bait and Ditch” Lender?
      Or only the way to experience and suffer…
      Please answer Thanks

      • Corey Curwick says:

        Ashok,
        In the case where you think you may have a ‘Bait and Ditch’ lender, if you haven’t given an upfront fee, keep all of your options open and keep searching for another source of financing. This way you have explored all options in case the lender decides to ‘Ditch’ you at the last minute. This way you may have a back up plan lined up ready to fund.

    • ZEE says:

      I agree so many out there, thinking of helping you! eg: DC Fawcett scooped $ 25,000 from my friend! and 2000 from me! We did not even get one deal done from them, after so many attempts in 6months! Note: we did give up!
      Another one called Jason Gilbert connection to NHQ took 1,000, but ignored my calls and I give up!zee

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