Funding For Flipping.... Anyone use them yet?

[Andres Rivero]

I was curious about this company who is offering me 80,000-100,000 from a line of credit. My fee would be $8-9k which would be taken from the backend. So basically,they would approve me based on my credit score. Then grant me 80-100k of which I can take any of that amount and then they would deposit it into my checking account and then charge me a monthly payment of 1% of whatever amount I used. The first time you use it they charge anywhere from 8-9k on the back end. My questions other investors is one, have you used them and two, how did it work out for you?

[Richard Balsam]

Here's the scoop. Personally - I won't touch it.

The company uses a computer algorithm to determine which credit card companies offer the best "free Borrowing" period for new credit cards issued. Quite a few credit cards issued by certain banks have a 12 month or 18 month period to borrow against. When you apply- you are in effect applying to a half dozen or more banks at the same time. (the company told me on the phone they shop up to 1,000 cards - not that I believe that high of a number anyway). The company charges an enormous amount to have the computer shop these cards. Then, in the first round, they find based on your credit score - $75K-$100K+ spread among all these issuing cards ( $10-$15-$20K+ per card) 

Now- just imagine this: six months after you take out these lines - you need more funding. But- you are on the hook for the last 75-100K that you borrowed. The company says they will do a second round to help you pay off the first round if needed. Now it's starting to sound like a pyramid scheme. Eventually, the first round must be paid back. you have a few months to pay all the funds PLUS the $9K. If not- try paying back 18-21% interest on the balance on multiple credit cards! Think your credit score will remain where it's at?

I spoke personally with a Dept Manager at Capital One credit card division. He is well aware of this type of problem - but it is technically not illegal...yet.  The problem with the bank- they approved someone by computer based on their credit score and ability to pay. But...this is happening all over at the same time, so when all banks pull your credit - they do not see the other banks on file- yet. Remember- it's happening at the same time. So- each bank approved based on a false assumption on your ability to pay just themselves back- they have no idea of the other banks lending you too. See the problem here? If they all knew this - no bank would approve, when they see all the cash being lent unsecured for real estate investing.

Buyer beware...I will not take part in this. But- if others feel confident in their ability to flip quickly and pay it all back- it should work.