Be Either a Lender or a Borrower: Private Money Lending

Estimated reading time: 2 minutes(Last Updated On: January 14, 2020)

Did you know you can easily create your own investment bank with private money lending when you utilize a self-directed IRA (SDIRA)? The potential to enjoy a healthy cash yield is just one of the many exciting possibilities afforded by the money-lending aspect of SIDRAs. Existing notes can be bought, whether fractional or whole, from the originator, but best of all, SDIRA loaning allows the SDIRA holder to retain the tax benefits associated with their account. Here’s how it works when you choose to do this with a self-directed IRA.

Private money lender

Creating a loan requires the private lender to open an SDIRA if they do not have one. The lender also chooses the borrower, principal amount, interest rate, time period, collateral, payment amount and frequency. Another thing the lender can do is have the borrower cover any Quest fees by paying points upfront to their IRA account for the loan, just as a bank would but usually at a lower cost through Quest. The documents are generated and the money is sent to the borrower who then makes payments to the IRA. It is important to remember that an SDIRA is its own legal financial entity which makes the SDIRA the lender, not the account holder, with all the income going back into the SDIRA.

Private money borrower

The borrower must first find a lender and have them open an SDIRA if they do not currently have one. The lender typically is deciding the terms. However, the borrower may have a say as well as it is a complete negotiation. If the loan is secured with an asset and the borrower defaults, the IRA is left with the collateral. Once the documents are processed, Quest sends the money to the borrower who repays the loan through Quest. This is also a plus as receiving private money can be quicker and less costly than a hard money lender or bank.

Benefits of private money lending

The benefits of self-directed IRA loans include the strategic control the lender has when choosing the terms. SDIRA loans are a passive investment and yield a cash stream as loan payments are made. With secured loans and predictable returns, a SDIRA involves lending money privately through traditional, Roth, or other IRA types. Loans through a SDIRA allow the lender and borrower to come to their own terms.

Are you interested in private money lending? Then contact a Quest Trust specialist for more information on SDIRA loans; we have a number of free resources available through our webinar archives and specialists who can guide you along the way: ( Don’t forget to also take a look at our YouTube video about private money lending for further information (

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