Stay Safe. Tips on How to avoid fraudulent Fake Private Investors

paperfree Aditi Bansal

Updated on Thursday, April 27, 2017

Many borrowers prefer using commercial hard money lenders that they have on the list of their researched lenders. This is always essential in avoiding getting defrauded by a fake private investor.

tags  #Fake Private Investors  #Hard Money Loans #


Many borrowers choose to use mortgage brokers to make sure that they get funding from a decent source. However, many people despise using new commercial hard money lenders. They simply prefer using commercial hard money lenders that they have on the list of their researched lenders. This is always essential in avoiding getting defrauded by a fake private investor. 

A private money lender is a non-institutional company or even an individual that lends money. The commercial loan is occasionally secured by a printed paper document and a contract of trust for the goal of financing your real estate transaction. Private money lenders are primarily considered to be based on relationships than commercial hard money lenders. However, many people think of private investors as a nationwide hard money lender with the rate of 8 to 13%.

Many people get cheated by bogus private money lenders who promise them low-interest rate on their loans and take their deposit money. They promise lower rates to act as an incentive or bait to borrowers. Most private commercial hard money lenders will appeal for a straightforward deposit of 1% of the loan deposited before releasing the loan. Therefore, you should be super careful when choosing the right commercial hard money lenders. Even if you are successful and financially smart, you can fall prey to investment fraud.

Here are some steps that will protect you from getting defrauded by a fake private lender. Red flags for fraud: 

  • Ask questions. Ask the lender for information like his attorney's name and the contact details. It is essential for you to request for reference information because many fake private money lenders tend to count on you as a borrower not to do some digging before you go into a deal with them. Fend them off by doing your research. Also, try to use the commercial hard money lenders that are in your state. Avoid using commercial hard money lenders that are not from your country and get your own lawyer.
  • Make sure your attorney suggests that the following information is included and written in the contract; the deposit money should be held in escrow and will be released only when the private commercial hard money lenders releases the loan. An escrow is a legal opinion whereby a third party holds an asset or a financial tool on behalf of two individuals that are in the process of closing a deal. The funds are then held by the escrow agent until the instructions or obligations are achieved.
  • Have your attorney make a draft of a contract that explains all these steps and has you and your lender sign it.
  • It is always recommended that you have the money transferred to your bank and not the lenders choice.
  • If the lender is not a fraud, he will agree to all the above steps.

If the private money lender doesn’t have a lawyer and wants the money to be transferred to his choice of bank, be sure that he or she is a fraud. Don’t be greedy and get into the trap of the fake private commercial hard money lenders. Know what you want to look for and learn more about the different types of commercial hard money lenders. Make sure you also know the types fraudsters and the red flag that may signal investment fraud. It is a scam when a person communicates with you through a router from another country. Make sure to investigate the phone number.

This page has a focus on Fake Private Investors, Hard Money Loans was shared by Aditi Bansal.

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