Private money advice

[Gene K.]

Just wanted to put this out there as we've been seeing a lot of borrowers getting into bad loans by predatory lenders. Here are just a few examples of clauses that really hurt borrowers that didn't read the fine print: 

1. Exit fees: some lenders charge early exit fees up to 2% on short term loans. Prepayment penalties are common for DSCR but usually don't exist for fix and flip or new construction loans.
2. Dutch interest: most lender charge non-Dutch interest on your loan, meaning you only pay interest on the amount that is provided (initial plus draws). At loan inception, interest should only be charged on the initial loan amount and not the total loan amount. If it's on the total loan amount, even if you haven't drawn yet, it's Dutch interest. Dutch interest will have lower interest rates, but the payments are usually more since it's based on the total loan amount. 
3. Min draw amount: some rehab loans limit the number of draws and require over $100k of work in place before the first draw. Others let you draw as much as you'd like. There are fees to draw so there is a happy medium there. 
4. Junk fees: the only real fees a lender typically needs to charge are origination, underwriting and legal/doc. Orig fees can be high when they are a broker and need to share the pts. 

There are many good lenders that care about the success of the borrower. I can recommend if you DM me. Good luck all!