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Updated about 12 years ago on . Most recent reply

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Marcy Albrecht
  • Investor
  • Canton, OH
4
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18
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Interest rate on private money loan

Marcy Albrecht
  • Investor
  • Canton, OH
Posted

I am looking to lend some money to a RE friend for one year for her seed money to buy an investment home. I am coming up with two different amounts of interest. Help!
Let's say: $ 10,000 x 12% int x 1 year
When I put it in my RE calculator the interest is at $ 661.87 with payments of 888.49. Total repayment of $ 10661.87
When I do straight 12% on $10000 the interest is showing at $ 1200.00.
Why is it different and what am I missing??
Thanks!

Most Popular Reply

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22,059
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Jon Holdman
  • Rental Property Investor
  • Mercer Island, WA
14,128
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22,059
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Jon Holdman
  • Rental Property Investor
  • Mercer Island, WA
ModeratorReplied

The difference is there is ZERO chance of that $10K disappearing when its setting in the bank. When you make this loan to your friend, the odds of it disappearing are much, much higher. Hopefully this works out. But I would only do this loan if 1) your life will not be affected at all if you don't get the money back and 2) you are willing to lose your friendship with this person. Both are very real possibilities. A HML would get four points and 15% and their loan would be much more secure than what you're doing.

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