Borrower guide
How to vet a private lender before you wire a dollar
Fewer than 12% of the roughly 13,600 active U.S. private lenders have any verifiable online reputation. This 7-step checklist is how experienced operators separate reliable capital from expensive mistakes.
Why vetting is the highest-ROI hour of your deal
Private lending runs on relationship-based trust. Without a prior relationship, both sides operate blind: the lender cannot see your track record, and you cannot see theirs. Lender impersonation and advance-fee scams targeting real estate investors are a documented, growing fraud category — and even legitimate lenders vary enormously in closing reliability and post-commitment behavior.
The cost of a bad lender is not just fees. It is a blown closing date on a contract with hard earnest money, a re-trade at the table when you have no leverage, or draw funding so slow it stalls your rehab crew.
The 7-step vetting checklist
- 01
Confirm legal identity and licensing
Match the entity name on the term sheet to state business registrations and, where applicable, NMLS or state lending licenses. Scam lenders frequently impersonate legitimate firms — industry associations report borrowers regularly calling to check whether claimed memberships are real.
- 02
Verify the closing record
Ask for the last 5–10 closed deals with dates, and cross-check against recorded deeds of trust or mortgages in county records. A lender who commits at 10 days but closes at 30 can kill a time-sensitive flip.
- 03
Get the full fee structure in writing
Origination points, underwriting fees, draw inspection fees, extension fees, exit fees, and default interest. Hidden charges surface most often at draw and extension time — get every fee enumerated before signing.
- 04
Talk to recent borrowers
Request 2–3 borrower references from deals closed in the last 12 months, and independently find at least one borrower they did not hand-pick. Ask specifically how the lender behaved when something went wrong.
- 05
Probe post-commitment behavior
The vetting question that matters most: what happens after the commitment letter? Re-trades at the closing table, surprise re-appraisals, and slow draw funding are the highest-cost failure modes for operators.
- 06
Check capital source stability
Balance-sheet lender, fund, or broker-dealer syndicating your deal? A lender dependent on selling your note before closing introduces execution risk you should price in.
- 07
Search their verified profile and reviews
Look the lender up on LendLedger for verified status, review history from real counterparties, and review-confirmed (not just self-reported) closing times. If they have no footprint anywhere, treat that as a data point.
One search replaces steps 1, 2, 4, and 7.
LendLedger profiles are verified before listing, reviews come from real counterparties, and closing times are marked self-reported or review-confirmed. Free to search.
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Frequently asked questions
How do I know if a private lender is legitimate?
Cross-check the entity name against state business registrations and any required lending licenses, verify their claimed association memberships directly with the association, confirm recent closed deals in county records, and look for verified reviews from past borrowers. Legitimate lenders never ask for large upfront fees before issuing a term sheet.
What are the biggest red flags when vetting a private lender?
Large upfront fees before any underwriting, no verifiable closed deals, pressure to sign without attorney review, a fee schedule they will not put in writing, no physical address or web footprint, and guaranteed approval regardless of the deal. Any one of these warrants walking away.
Do private lenders need to be licensed?
It depends on the state and loan type. Business-purpose loans secured by real estate are exempt from licensing in many states, but states like California, Arizona, and Nevada require licenses for many private lending activities. Always confirm the requirements for the property state — an unlicensed lender in a license-required state is an immediate disqualifier.
How long should a private lender take to close a fix-and-flip loan?
Competitive private lenders close fix-and-flip loans in 7–14 days; well-prepared deals with existing relationships can close in under a week. Non-bank lenders average about 7 days from application to disbursement versus roughly 32 days at banks. Verify the record, not the promise — LendLedger distinguishes review-confirmed close times from self-reported ones.
Where can I read reviews of private lenders?
General review sites rarely cover private lenders, and forum feedback is scattered and unverified. LendLedger is a dedicated directory where lender profiles are verified before listing and reviews come from verified counterparties on real deals — covering hard money, bridge, fix-and-flip, DSCR, construction, MCA, and revenue-based financing.
What questions should I ask a private lender before committing?
Ask: How many loans did you close last quarter, and can I verify two of them? What is your complete fee schedule including extensions and draws? Who funds your loans — balance sheet or syndication? What happens if the appraisal comes in low after commitment? How fast do you fund draws? Their comfort answering is itself a signal.
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