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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Matthew P.
Rental Property Investor · UT (utah) · Member since 2018 · 21 posts · 2 votes
7y
I haven't taken money out yet, still sending offers out with my realtor on multiple properties. I have been offering two months with no takers, so the HELOC has been great not paying interest or fees for it to sit there waiting until I get a deal. I see your point, if you have a stream of properties under contract with upcoming closing dates. I am just not at that point yet. I would love to know the criteria for these NC loans, because I do see the "down the road benefits". Who is giving these $500K NC loans?
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Matthew P.
Rental Property Investor · UT (utah) · Member since 2018 · 21 posts · 2 votes
7y
I appreciate being challenged, it's what makes us dig deeper to find and understand the truth. Thank you for your engagement of conversation. I really am asking for help to understand how to access what your talking about. I think of a NC loan like a personal line of credit, because that has been what I have applied for in the past. I have only been able to get about $40k available doing this with out collateral. I would love to learn more about the NC loans your talking about and how and where to get them, this would help me jump up to a higher level of entry to RE. I've been trying to work these deals with in the realm of finance I currently have in place i.e. HELOC.
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Dawn Kabba
Member since 2020 · 1 post · 0 votes
5y

@Mian Rizwan, did you ever use the loan? I'm interested to know as I have been getting correspondence from them and wondering if they are legit
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Martin Shaw
Investor · Memphis, TN · Member since 2019 · 24 posts · 2 votes
5y
So @Mian Rizwan did you ever take the loan. I’m interested to know how it turned out as I have been contacted by them as well.
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
5y
Originally posted by @Martin Shaw:
So @Mian Rizwan did you ever take the loan. I’m interested to know how it turned out as I have been contacted by them as well.

I was wondering the same thing.
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Martin Shaw
Investor · Memphis, TN · Member since 2019 · 24 posts · 2 votes
5y
@Joe Villeneuve
I’m in a business credit group and a lady in the group has went through the entire application process and was offered 70k with similar fees as above. Her only hold up is she’s using the money to start up a business and is waiting on some contracts to come through before she accepts the funding. She said the process was start forward as can be. I’ve seen both good and bad reviews online.
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
5y
Originally posted by @Martin Shaw:
@Joe Villeneuve
I’m in a business credit group and a lady in the group has went through the entire application process and was offered 70k with similar fees as above. Her only hold up is she’s using the money to start up a business and is waiting on some contracts to come through before she accepts the funding. She said the process was start forward as can be. I’ve seen both good and bad reviews online.

Do you know what they based to amount of the loan on?
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Martin Shaw
Investor · Memphis, TN · Member since 2019 · 24 posts · 2 votes
5y
@Joe Villeneuve
Transunion soft-pull and your income (both current and projected)
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Ola Dantis
Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
5y
I'd say go for it. Invest in a cash-flowing real estate asset and shoot for a higher return than the interest rate (5-6.5%) they are offering you.
All you have to do is take the arbitrage and pay back the loan after the life cycle of your deal or after a capital event such as REFI.
Now, all I'm thinking is I should have become a doctor lol 😂
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
5y
Originally posted by @Martin Shaw:
@Joe Villeneuve
Transunion soft-pull and your income (both current and projected)

Was the 70k the amount she requested, or was that what they ended up approving her for and she requested higher?
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
5y
Originally posted by @Ola Dantis:
I'd say go for it. Invest in a cash-flowing real estate asset and shoot for a higher return than the interest rate (5-6.5%) they are offering you.
All you have to do is take the arbitrage and pay back the loan after the life cycle of your deal or after a capital event such as REFI.
Now, all I'm thinking is I should have become a doctor lol 😂

70k isn't enough to do this with, but if the approved amount was at least $150k, then it would end up being free money...with unlimited uses for it.
1 Reply
Martin Shaw
Investor · Memphis, TN · Member since 2019 · 24 posts · 2 votes
5y
@Ola Dantis
Actually you don’t have to be in Healthcare. That’s who the company was set up to market to, but other professionals are able to receive funds as well.
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Martin Shaw
Investor · Memphis, TN · Member since 2019 · 24 posts · 2 votes
5y
@Joe Villeneuve
That I don’t know, I’ll be applying myself today after she informed me that you don’t have to be in the healthcare field or industry. That’s who they market to but if you are a “professional” in any field or have extensive experience you can receive funding. I plan to use it for real estate and just pay it off when the 2-3 yr dead period for pre-pay ends.
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Martin Shaw
Investor · Memphis, TN · Member since 2019 · 24 posts · 2 votes
5y
@Joe Villeneuve
It can be free money at any amount if you use it properly. I’ll keep you guys posted. Hell I might even try to get a job there if everything is as they say it is. I was once a commercial loan agent in a prior lifetime. Made great money. If this is open to more than just Healthcare field I know is kill it.
1 Reply
Steve Morris
Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
5y
5.0%-6.5% for a med professional is not that great a rate. Why not just go to a mort broker or a bank you have a relationship with?

I know it's a bit more work than responding to an eMail, but think it'd work better for you.
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Martin Shaw
Investor · Memphis, TN · Member since 2019 · 24 posts · 2 votes
5y
@Steve Morris
I believe this is geared towards those who can’t get standard bank financing for whatever reason or who need it quickly. Also it doesnt show up on either your personal nor business credit reports enabling you to use the money correct what may be holding you back form from traditional financing. Bank aren’t that great at giving out funding for start-ups with no present income.
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Gene Cook
Residential Real Estate Broker · Penn Valley, CA · Member since 2014 · 14 posts · 2 votes
5y
I know this is an old thread but I have to ask Joe Villeneuve what the heck he is talking about . With a loan you pay a fee and interest on an ongoing basis. A HELOC you pay no fee and ongoing interest only while you are using the money. Assuming the interest rates were the same you save with a HELOC because their is no fee and you don't pay interest on the money during those times it is not used e.g. between closing on a flip and acquiring another one .
Am I missing something here?
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
5y
Originally posted by @Martin Shaw:
@Joe Villeneuve
That I don’t know, I’ll be applying myself today after she informed me that you don’t have to be in the healthcare field or industry. That’s who they market to but if you are a “professional” in any field or have extensive experience you can receive funding. I plan to use it for real estate and just pay it off when the 2-3 yr dead period for pre-pay ends.

Do me a favor and keep me posted on this. PM me if you want to keep this between us (based on potential info you don't want made public).
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
5y
Originally posted by @Martin Shaw:
@Joe Villeneuve
It can be free money at any amount if you use it properly. I’ll keep you guys posted. Hell I might even try to get a job there if everything is as they say it is. I was once a commercial loan agent in a prior lifetime. Made great money. If this is open to more than just Healthcare field I know is kill it.

I did some of that too. It was interesting to say the least. You learn a lot about how money works...things most REI today aren't exposed to and thus don't really understand (not their fault). I based a lot of my system on what I learnt there too.
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
5y
Originally posted by @Gene Cook:
I know this is an old thread but I have to ask Joe Villeneuve what the heck he is talking about . With a loan you pay a fee and interest on an ongoing basis. A HELOC you pay no fee and ongoing interest only while you are using the money. Assuming the interest rates were the same you save with a HELOC because their is no fee and you don't pay interest on the money during those times it is not used e.g. between closing on a flip and acquiring another one .
Am I missing something here?

Missing a lot. First, throw out the idea of comparing interest since the interest is applied differently...and not just because the loan is amortized over 30 years. Percentages lie to you.

Now, as far as the cost of the loans are concerned:

1 - They both have upfront fees that are paid once.

2 - The cost of use for a HELOC is applied every time you use it. This is a repeat cost then. In a way, every use of the HELOC becomes a new loan that you don't need to apply for. Example: If you used the HELOC for a DP, then paid it back with the rent money. Then accessed it again for the next DP, and kept repeating this. Each time you accessed it for a different DP, you got charged interest...again.

3 - The cost of the use of the loan is applied once. If this was collateralized, you would get one use out of it. Example: A mortgage. One use, one cost.

4 - This isn't collateralized, so you can use it as often as you want, but you don't get charged for every use. Example: If you used the loan to buy/rehab a flip, sold the property and got the original cash from the loan back (plus), then used it again on the next property. REpeated this over and over. You wouldn't get charged again for the use of the same money on each property. You're only getting charged once...the original loan. This means that the cost of this loan is reduced per use with every subsequent use of the same money. This I refer to as a "cash like substance".
Another way of looking at this is if the initial use of the uncollateralized loan has enough cash flow to make the monthly payments on that loan, then every time you use the same money, over and over, that use of it is free.
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
5y
Originally posted by @Steve Morris:
5.0%-6.5% for a med professional is not that great a rate. Why not just go to a mort broker or a bank you have a relationship with?

I know it's a bit more work than responding to an eMail, but think it'd work better for you.

The rate isn't what's important...at all. The fact that is isn't collateralized is. It's free money if you use it correctly. I'd pay 3 times the interest (minimum loan would need to be at least $500k though), as long as it was uncollateralized.
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Steve Morris
Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
5y
I'd pay 3 times the interest (minimum loan would need to be at least $500k though), as long as it was uncollateralized.
I don't know. You could get a bunch of credit cards and get cash advances then if collateral is an issue :)
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James B.Pro Member
Investor · Monterey Area, CA · Member since 2011 · 150 posts · 81 votes
5y
@Joe Villeneuve @Martin Shaw @Mian Rizwan @Ola Dantis
Thanks for reviving this thread! My knowledge and strategy are slowly catching up to understand this :)
I gaining familiarity with secured LOC's and see that there is a limit on the amount I can borrow. But, If i can borrow at 4.75% and earn, say, 10% somewhere else, why not. Besides, I'm not the one paying back the loan, my tenants are...
Hope to level-up to the unsecured loan one day... and, I'm in this RE game for life, so I'll get there.
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Gene Cook
Residential Real Estate Broker · Penn Valley, CA · Member since 2014 · 14 posts · 2 votes
5y
So again Joe I think we're talking in different languages but when you say interest rate doesn't matter what the heck? you get a loan you're paying an interest rate for however long you have that loan. if at some point the circumstances of investment allow you to repay that loan then great. The cheaper that interest is and the reduceed amount of time you're paying on it e.g. not when you're not using it makes the cost of that money less. you can spin scenarios where the original loan gets rolled over and over and that is fine but you're still paying interest on that and if you're having successful real estate Investments ultimately making money then great we just made money and paid for loan costs. it would be the same exact thing with a HELOC in that once you paid it off hopefully you have some money left over which you could consider is pre paying interest on your next HELOC.
but nothing changes the fundamentals of the fact that if you're borrowing money the rate you pay for that money including fees is your cost for that money
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
5y
You're missing the point. You're focused on the percentages that don't matter if the dollars generated from the use of the loan/cash generates enough money to cover the cost/dollars, and can be used over and over again at no added cost per use.
If the loan pmt was $500/month, and the first time I used part of that cash as a DP on a property that had a cash flow of $750/month. That would mean I had the cost of that original loan covered with the first investment. It would also mean I had money/cash left over from the original loan that I didn't spend/use. If I were to use that cash to buy/rehab a property, then flip it (getting the original cash back to use again) for a profit, I would use the profit as a DP on the next rental property getting more cash flow, and the original cash I used to buy/rehab would be used again on the next buy/rehab/flip.
I could repeat this to infinity, with every repeat use of the original funds as buy/rehab/flips, generating new DP's for cash flow and returning the original cash with each flip, the money becomes free. Remember, the original use is making the payments, so every repeat use has no added costs applied to it...thus they are free.
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