When taking out a private money loan it is important to secure the loan. Secure the loan with collateral allows the lender, whether it be a friend, family member, or any other investor, to take the property in lieu of payment so that they are able to get their money back if the borrower defaults on the loan.
Some of the reasons that collateral is important is say a borrower dies suddenly before the loan is repaid, or what if the borrower gets sued. If a lien is not properly filed, then a borrower could end up being pressured to utilize the equity in the property to satisfy a debt, or a creditor could go after the property.
This is why it is import to secure the loan with the property as collateral so that the lender’s interest is protected. Having a the loan secured will also benefit both the lender and the borrower on their taxes as long as everything is structured properly. A borrower will not be able to deduct interest cost is they have not secured the loan.
It is always important to secure the loan to protect all parties. Private Money Lending Guide can help you contact a reputable private or hard money lender today.