Making Loans As an Investment
- 1). Decide how much you can afford to lend and set up the lending process. You need a contract that specifies the terms of the loan. You may want to consult an attorney for this step so that your contract includes all of the information that you need. Determine the maximum loan term, the interest rate and any other loan variables.
- 2). Research the legal aspects of issuing private loans. Individual lenders are subject to usury laws on a state level. This means that there could be limits on the amount of interest that you can charge, as well as how many loans you can have at one time without getting a license. Looking on a state government website could give you an idea of the laws associated with usury and collateral requirements in your state.
- 3). Advertise the fact that you are willing to lend money. One of the best ways to do this is to sign up for a peer-to-peer lending service. With these services, you can sign up through a website and be connected to people who need to borrow money. You could also put a classified ad in the newspaper. You could even set up a website and pay for advertising to bring in customers.
- 4). Evaluate the applicants for your loans. When a person or business wants to borrow money from you, you need to get a great deal of information about them. Try to find out why they are borrowing and get personal information. Ask them to consent to allowing you to see a copy of their credit report.
- 5). Lend money to applicants who seem like a low risk. Go over all of the terms of the loan with them so that there is no confusion. The interest that you receive should compensate for your risk in lending the money.
