Noncollateral loan - too good to be true ?

St. Louis, MO · Member since 2017 · 32 posts · 5 votes

Came across a non collateral loan offer ( work as a physician and got a letter from a firm offering 50 K -200k for personal / professional use). Was Offerred rates of 5-6.5% after few phone calls, with early return penalty for 3 yrs etc and company was willing to transfer money to my account in 1-3 days ( it’s not a line of credit)

Thinking of using this as a down payment for my next deal, but it took me 4 months to find my last deal. How should I play my cards ? Is this too good to be true ?

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Don KonipolBusiness Member

Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes

@Mian Rizwan Actually people in certain professions and people above certain thresholds of income or credit score do get these solicitations all the time Often, but not always, the rates quoted are introductory rates and may be good for 6 months - 18 months. Years ago I received an offer for ‘up to $200,000’ signature line of credit at a very attractive rate. I applied, did indeed receive the $200,000, and invested it in a high yield mortgage loan, earning about a 8% spread ($16,000 per year) over a 4 year period. When interest rates came down, and the spread was no longer attractive, I had heard the lender was having some loss issues. I offered an immediate payoff for a $50,000 discount, and was able to negotiate a $32,500 discount, with the provision of no negative report to the credit bureau. About two months after the payoff, I received another offer from the same lender, offering $200,000 at a reduced rate of interest since I was a ‘preferred’ customer. People with bad credit are penalized by the availability, amount, and cost of capital. People with good credit are rewarded with same.

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Tia K.
Rental Property Investor · Miami, Atlanta & Jacksonville · Member since 2018 · 12 posts · 4 votes
7y
Was the offer against you or your business?
0 Reply
Mian Rizwan
OP
St. Louis, MO · Member since 2017 · 32 posts · 5 votes
7y
Against me I suppose ....
0 Reply
Gilbert Dominguez
Investor · Detroit, MI · Member since 2016 · 211 posts · 144 votes
7y
When it comes to receiving unsolicited loan offers seeing is beliveing. I say show me the money, who you are , and where we can meet in person. if anyone asks you for a dime in advance that happens to be against the law, so be careful.
Anyone who knows me knows I am not one to borrow money but even so I have never heard of any legitimate source of loans to process and settle a loan with money in your personal or business bank account in only 3 days unless you are dealing with a private party but I would wonder just who are these people that feel they know you well enough to be sure you will pay then back ?
I am not saying tha you have not been offered a legitimate loan but as they say, " something just doesn't smell right".
3 Reply
Charlie MacPherson
China, ME · Member since 2014 · 3k+ posts · 4k+ votes
7y
@Mian Rizwan The old addage "if it sounds too good to be true, it probably is" has become conventional wisdom for a reason.
Unsolicited, non-secured. Seems to fit that description pretty well. The hallmark of scammers is advance fees, but I'd also be worried about giving them your personal info and SS#.
As a physician, I'd bet you can get a decent line/loan from any number of reputable lenders.
0 Reply
Mian Rizwan
OP
St. Louis, MO · Member since 2017 · 32 posts · 5 votes
7y
I hear what you are sugesting. It’s through “bankers healthcare group“ - they have website etc and seems legit but I’ll do more due diligence
Running numbers before buying a property particularly if 2 loans are involved is what I am finding difficult at this point
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
7y
Sounds too good not to follow up and find out more. If you want, PM me and we'll research this together. I look for loan sources like this all the time.
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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
7y
@Mian Rizwan Actually people in certain professions and people above certain thresholds of income or credit score do get these solicitations all the time Often, but not always, the rates quoted are introductory rates and may be good for 6 months - 18 months. Years ago I received an offer for ‘up to $200,000’ signature line of credit at a very attractive rate. I applied, did indeed receive the $200,000, and invested it in a high yield mortgage loan, earning about a 8% spread ($16,000 per year) over a 4 year period. When interest rates came down, and the spread was no longer attractive, I had heard the lender was having some loss issues. I offered an immediate payoff for a $50,000 discount, and was able to negotiate a $32,500 discount, with the provision of no negative report to the credit bureau. About two months after the payoff, I received another offer from the same lender, offering $200,000 at a reduced rate of interest since I was a ‘preferred’ customer. People with bad credit are penalized by the availability, amount, and cost of capital. People with good credit are rewarded with same.
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
7y
This is what I'm always looking for in a funding source. This is potentially the last funding you'll ever need, if you know how to use it. This isn't a one time use. To truly make this the Goldmine it can be, you need to take advantage of the lack of the usually required commercialization, and use it over and over again...paying for it only once.
Like I said earlier...this could be a potential Goldmine if used (not spent) properly
4 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Don Konipol:
@Mian Rizwan
Actually people in certain professions and people above certain thresholds of income or credit score do get these solicitations all the time
Often, but not always, the rates quoted are introductory rates and may be good for 6 months - 18 months.
Years ago I received an offer for ‘up to $200,000’ signature line of credit at a very attractive rate. I applied, did indeed receive the $200,000, and invested it in a high yield mortgage loan, earning about a 8% spread ($16,000 per year) over a 4 year period. When interest rates came down, and the spread was no longer attractive, I had heard the lender was having some loss issues. I offered an immediate payoff for a $50,000 discount, and was able to negotiate a $32,500 discount, with the provision of no negative report to the credit bureau. About two months after the payoff, I received another offer from the same lender, offering $200,000 at a reduced rate of interest since I was a ‘preferred’ customer. People with bad credit are penalized by the availability, amount, and cost of capital. People with good credit are rewarded with same.
a little off topic but when i was activly HML in Mississippi I had a pretty significant LOC with Trustmark .. and when talking to my banker there he told me they really focused on the medical profession.. providing all the capital for those folks to buy their homes with minimal down include the furniture and cars etc etc.. i could not figure out how these under 40 doctors were living in million dollar homes with 300k in toys :) the banker said once we have these doctors as clients we have them for life and their entire banking needs.
My personal banker in Oregon their bank really goes after Dentists .. and they do the same thing. not to the extent the Jackson MS bankers did.. but i can see this.
there is a lot of that unsecured funding going around and I can see that going for a while until they start taking loss's..
I have enjoyed a true unsecured line from my banker since about 2002.. and its mid 6 figures at bank rates.. having to pay 1 point a year for it.. but its check book.. I use it to fund deals then back fill.
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Kelly Iannone
Rental Property Investor · Orlando, FL · Member since 2018 · 301 posts · 354 votes
7y
I really need to learn more about these creative financing options; they’d open up a whole new world.
1 Reply
Mian Rizwan
OP
St. Louis, MO · Member since 2017 · 32 posts · 5 votes
7y
Food for thought ....
P. S - in reference to the above comments, this can be both a good and bad thing Depending on how you plan to use. I see so many doctors recently graduating from residency program and trying to buy million dollar homes and flashy cars .... “ clients for life “ for sure
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Darci Minshall
Fleetwood, PA · Member since 2018 · 15 posts · 8 votes
7y
@Mian Rizwan I had received similar offers also from BHG. What I really liked was that it's a commercial loan and will not appear on your credit report unless you default. The appeal there being it wouldn't interfere with getting bank financing for buy and hold. I spoke to several reps but ultimately decided to hold off. My plan would have been to reserve enough of the loan money to make a year's worth of payments and use the rest to invest in distressed properties. I plan to look into this again soon but initially got spooked because it seemed too easy. I felt like they wanted to throw a crazy amount of money at me just because I was a pharmacist with great credit. They didn't seem to care what I planned to use it for. I'd be eager to hear if you use them. The reviews online were pretty mixed.
1 Reply
Mian Rizwan
OP
St. Louis, MO · Member since 2017 · 32 posts · 5 votes
7y
@ Darsi Minshal I agree, but one issue with that product is that it’s not a line of credit but a direct loan ( so you will start getting charged even if that $ is just sitting in your bank while you search for deals). Nevertheless i plan to use down the line at some point
0 Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
7y
Originally posted by @Mian Rizwan:

@ Darsi Minshal I agree, but one issue with that product is that it’s not a line of credit but a direct loan ( so you will start getting charged even if that $ is just sitting in your bank while you search for deals). Nevertheless i plan to use down the line at some point
That's what you want. With a Line of credit, you get charged every time you use it. Whit a loan, you don't. Use it the first time, get it back with profit, then use it again...with profit, and repeat...
If you did that with a LOC, you would be charged again every time you used it. With a Loan, it doesn't matter how often you use it. You are only charge up front one time. This means, that the cost per use is reduced every time you reuse those same funds.
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
7y
If you plan correctly, this money can be free...yes, you read that correctly...FREE.
0 Reply
Mian Rizwan
OP
St. Louis, MO · Member since 2017 · 32 posts · 5 votes
7y
@Joe Villeneuve words of wisdom indeed - couldn’t sleep after reading your comments :) Will be in touch for sure
0 Reply
Tom S.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
7y
@Darci Minshall Just chiming in on the comment, "these are commercial loans and don't appear on my credit report...it wouldn't interfere with getting bank financing for buy and hold".
Most of my loans are commercial and don't reflect on my credit, but it will still show on your taxes. Owned personally or LLC, it still comes out on Sch E. Most bank lenders will still request your tax returns. So be sure to factor that in.
- Tom
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Matthew P.
Rental Property Investor · UT (utah) · Member since 2018 · 21 posts · 2 votes
7y
@Joe Villeneuve I never pay anything for my lines of credit when not actively using them nor pay fee when I use them. Any credit loan you get, you pay the moment you sign up for it. Just confused with your comment you take a charge every time you use a credit line vs one time fee on a loan. Also, there is generally an origination fee with loans vs nothing for lines of credit.
1 Reply
Darci Minshall
Fleetwood, PA · Member since 2018 · 15 posts · 8 votes
7y
@Tom S. I didnt know that! Thanks for the heads up- I appreciate it!
1 Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
7y
Originally posted by @Matthew P.:
@Joe Villeneuve
I never pay anything for my lines of credit when not actively using them nor pay fee when I use them. Any credit loan you get, you pay the moment you sign up for it. Just confused with your comment you take a charge every time you use a credit line vs one time fee on a loan. Also, there is generally an origination fee with loans vs nothing for lines of credit.
You just made my point. Every time you "do use them" (LOC), you get charged interest again. All loan fees are one time fees.
Let me explain it this way. You need $100k to buy/rehab a series of flips. Your options are either a HELOC or a Non-collateralized loan. Every time you flip a property you get the cash from the two sources back (plus profit).
First Property:
HELOC - Interest charge until you pay it back.
NCLoan - Fees up front and interest on loan.
Second Property:
HELOC - Pay back debt. New withdrawal from HELOC and new Interest charge until you pay it back.
NCLoan - Don't need to pay back loan. Re-use same funds from first property so No new Fees and no added interest on loan.
Third Property:
HELOC - Pay back debt. New withdrawal from HELOC and new Interest charge until you pay it back.
NCLoan - Don't need to pay back loan. Re-use same funds from first property again, so No new Fees and no added interest on loan.
HELOCS do not include limited use/availability. The Loan cash can be used forever, with no added cost to use per use.
There is a new cost per use of the HELOC cash every time you use it. The cost per use of the Loan decreases every time you use it.
1 Reply
Roshan K.Pro Member
Oklahoma City, OK · Member since 2017 · 258 posts · 215 votes
7y
Originally posted by @Mian Rizwan:

Came across a non collateral loan offer ( work as a physician and got a letter from a firm offering 50 K -200k for personal / professional use). Was Offerred rates of 5-6.5% after few phone calls, with early return penalty for 3 yrs etc and company was willing to transfer money to my account in 1-3 days ( it’s not a line of credit)
Thinking of using this as a down payment for my next deal, but it took me 4 months to find my last deal. How should I play my cards ? Is this too good to be true ?
Yeah I've gotten this too and looked into. For me, it was supposed to be for my dental business however for improvements, repairs, investments into equipment etc.
But once given, they could not take it back so I could always use it for real estate.
55K was offered, but, the rate was too high @ 10% and was on a 3 year amortization.
If you need the cash, then it's fine. But if you're a physician, you should be making enough to not need to use other people's money. Why take such an unnecessary expense on the money when you have plenty of your own?
1 Reply
Roshan K.Pro Member
Oklahoma City, OK · Member since 2017 · 258 posts · 215 votes
7y
just saw that it was bankers healthcare group... same one that solicited me
1 Reply
Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
7y
The loan isn't unsecured. YOU secure it. It's just not secured by property or tangible asset.
In a 'perfect world', you wouldn't need anything to secure the loan other than your good name. When my buddy loans me a few bucks, I don't have to notarize 10 pages of documents to securitize some RE. And on a bigger scale, I actually did a private loan (I was the borrower) of about 1/2 million with zero collateral (and that was when I was much smaller in scale, so I'm surprised she did it)
But since bad things can happen to good people, most lenders want something tangible to back it up.
1 Reply
Matthew P.
Rental Property Investor · UT (utah) · Member since 2018 · 21 posts · 2 votes
7y
Can anybody point me in the direction who gives these monster NC loans out and what is the criteria? When I have the deals all lined up to do this, I will go that route, but I pay nothing right now on the HELOC trying to lock down a deal.
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
7y
Originally posted by @Matthew P.:

Can anybody point me in the direction who gives these monster NC loans out and what is the criteria? When I have the deals all lined up to do this, I will go that route, but I pay nothing right now on the HELOC trying to lock down a deal.
So when you take the money out of your HELOC, you don't pay interest on it?
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