Private Lending with a Self-Directed IRA

Private Lending

Satisfy demand for capital for those looking beyond banks by originating loans with your self-directed account.

Your account can lend money to individuals and businesses or purchase portions of existing loans through third-party platforms.

INDIVIDUAL HOME LOANS
BUSINESS STARTUP LOANS
BUSINESS CAPITAL INFUSION
PURCHASE OF EXISTING LOANS

You Choose the Terms

Although your account is technically the “lender,” as the account holder, you have the power to qualify buyers and make final decisions on loan terms and interest rates.

Secured or Unsecured

As the account holder, you can negotiate with the borrower to determine whether the loan will have security or not. Typically, security instruments will include a deed of trust, a vehicle title, etc.

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Private lending with a self-directed IRA is an investment strategy that many investors are turning to. Using a self-directed IRA, investors can lend money to others, such as individuals or businesses, and receive interest on that loan. The loans are often secured by assets, such as property, so that the investor can recover their money should the borrower default.

Private lending can be a way for investors to diversify their portfolio and potentially earn higher returns than they would with traditional investments, such as stocks and bonds. With a self-directed IRA, the investor has control over where their money is invested, allowing for more flexibility in their overall investment strategy.

One of the key benefits of private lending with a self-directed IRA is the tax advantages it offers. The interest earned on the loan can be deposited directly into the IRA, allowing for tax-deferred growth. This means that the investor doesn’t pay any taxes on the income earned from the loan until they withdraw the money from the IRA. Additionally, if the IRA is a Roth IRA, the interest earned can be tax-free.

There are some rules and regulations that investors need to be aware of when using a self-directed IRA for private lending. Firstly, the loan cannot be made to a disqualified person, such as the investor’s spouse, children, or parents. Secondly, the loan must be arms-length, meaning that the terms of the loan must be fair and reasonable. Finally, the investor must ensure that the loan is secured by an asset that has a value greater than the amount of the loan.

Investors must also be aware of the potential risks involved in private lending. There is a risk that the borrower might default on the loan, meaning that the investor could lose their money. It’s important to conduct thorough due diligence on the borrower and the asset being used as collateral before making the loan.

Overall, private lending with a self-directed IRA can be a smart investment strategy for those looking to diversify their portfolio and potentially earn higher returns. However, it’s important to understand the rules and regulations involved and to conduct proper due diligence before making any loans. As with any investment, it’s important to consult with a financial advisor before making any decisions.