It’s rare, especially on Scout, but it’s possible you might come across a loan shark. Loan sharks can make your life a living nightmare in the worst of cases. Spotting these loan sharks early and avoiding them will help ensure your real estate venture is as successful as possible.

 What to look out for:

Interest Rates

The most common sign of a loan shark is that this predator won’t disclose the interest rate, or it’ll be above your State’s usury limit. Usury refers to an illegally high-interest rate, and loan sharks are betting that you won’t put in the work to find out what those limits are. Scout’s got your back: you can find your state’s usury limits here.

 

Check for their License.

Although this doesn’t prevent the lender from being a loan shark, it will weed out lenders operating illegally — the biggest group of sharks. Check with your State’s real estate bureau to see they are properly licensed.

 

No Paperwork.

Loan sharks know that you want your cash quickly and easily if you’re in the market for a hard money loan. That’s why another hallmark of loan sharks is that they offer little or no paperwork. Make sure that you have a signed contract or some other form of tangible proof of the loan before you accept the money.

Ask an expert.

The best and most important way to guard against loan sharks is to always have your loan contract looked over by a real estate attorney. This will not only protect you from illegal hard money lenders but will also tell you if the terms of your loan are fair or not. This may cost you some cash, but it’s a small price to pay for your long-term security.

If you receive any inquiries on Scout from an apparent lender that has these qualities, feel free to contact us.