Private Debt
What is private lending?
Private lending is the use of your retirement account as small lending institution. You have the opportunity to lend your retirement account funds out to other individuals and companies with the benefit of earning interest on the loans.
How can I invest in Private Debt through my IRA?
Investing in promissory notes can actually mean a number of things.
It can mean the purchase of an existing promissory note. This situation can arise when a lender makes a loan and then sells the loan. If you’ve borrowed money to purchase a home you may have experienced this situation. It’s very rare these days to find a lender who actually services a loan from inception to payoff. Typically the loans are bundled and sold.
In the same way, your MyRA IRA may be able to purchase a loan.
For example, a small lender or an individual will make a loan and then need to recover the money lent for some purpose (other than borrower default). This provides an opportunity for the cash or liquid assets in your MyRA IRA to purchase the note and its associated payments. More often than not, the lender will be willing to sell the note at a discount and you will not only enjoy the interest but some of the principal as well.
It can also mean turning your retirement account into a bank.
While some loans are secured by real estate, there are also loans to be made for the purchase of automobiles, business equipment and anything else that someone might what to purchase with credit. The key is that the loans can be made from your retirement account and you can set your rate of return by setting the interest rate and charging origination fees.
What is a real world example?
Let’s say that you have a friend who’s buying a house or a car and is in need of a loan to complete the purchase. You have funds available in your retirement account so you agree to lend your friend the money needed. Your friend signs a promissory note that shows how much money was lent, at what rate of interest and the repayment schedule. Remember, the lender is your retirement account thus all of the payments are made to your retirement account.
How do I get started?
First you will need a self-directed retirement account, like those offered here at The Kingdom Trust Company. You can complete one of the forms below (depending on the type of retirement account you are interested in) or you can call us at 888-753-6972 and let us fill out the form for you.