Checkbook Control SDIRA, QRP & 401k Private Lending
Self-directed retirement accounts – Checkbook IRA, Checkbook 401k, Checkbook QRP, Checkbook HSA, & Checkbook DB Plans – can “be the bank” and make private loans, hard money loans, equipment loans, auto loans, and all other forms of secured and non-secured lending. If you’d like to set-up a Private Lending IRA, Private Lending Solo 401k, Private Lending QRP, Private Lending Defined Benefit Plan, or Private Lending HSA – this page provides the instructions for doing so compliantly.
What is Private Lending?
- Your Checkbook Retirement Account plays the part a bank normally would and extends loans for mortgages and trust deeds, secured and unsecured notes, as well as judgments and structured settlements.
- The interest rates on these loans may be far higher than those charged by banks, resulting in significant profits to you.
- With checkbook control of your retirement funds you can choose who to lend to, set the interest rate, and assess the adequacy of any required collateral.
- Private lending can be advantageous for self-directed retirement accounts because they’ve historically provided greater yields than the dividends and capital growth of the stock market, but still have the benefits of debt-instruments.
Private lending provides a flexible benefit for both the lender and borrower.
- Use Check-Book Control to provide funding to borrowers when they need it
- You get to determine your required rate of return, the loan recipient, the type and terms of the loan, and also decides whether to provide secured or unsecured loans. Secured loans are backed by collateral to protect from default. Unsecured loans are offered at a higher rate of interest to compensate the lender for the additional risk.
Checkbook Private Lending Compliance
- The lender is the Checkbook Retirement Account. All paperwork and documentation are done in the name of the investing entity, which may be your IRA-LLC, Solo 401k, QRP, or Defined Benefit Plan.
- All expenses and revenue must flow through the Retirement Account. Personal cash cannot be used to fund a promissory note held by your retirement account and payments of principal and interest must flow through the Checkbook Retirement Account. All investment-related expenses should be paid from retirement funds.
- Loans to disqualified persons should not be made. Loans may not be made to anybody defined as a disqualified person in Section 4975 of the Tax Code.
- Beware of state lending laws. States may have laws that impact the amount of interest you may legally charge and the nature of the security interest in collateral.