In today’s Finance Minute let’s talk about how you can use your own money to lend to other people, just like the Banks. The banks are in the business of getting you to keep your money with them via savings, GICs, TFSA, Mutual funds and then what do they do? They lend the money out for a much higher interest. In other words they make money from your money. The banks are smart though they will not just lend the money to anybody. They have to have collateral, they have to check somebody’s credit and capacity to pay. I call these the three C’s of credit.
What if you have that ability too? You become the lender? There are many ways for you to invest your money by being a lender. I know of many who use their RRSPs, savings, and extra cash to invest in mortgages or real estate lending. They get better returns, they have collateral which is the property, they know the credit history of the applicant, and they know the capacity of the applicant. No you don’t have to do all the work. Somebody reviews all of this for you. So instead o f you investing your money and getting poor returns or putting your money in something you don’t understand, you will be directing your hard earned money on something tangible. The returns on these types of investments are in the 8-10% range. And remember you have the property as your security. I know of reputable companies who are helping investors take back control of their money.