Selling your notes to a promissory note buyer allows you to raise a large sum of money without having to take out a bank loan. It takes as little as two weeks to sell your debt instrument, whereas a bank can take more than a month. There are several other advantages – you lose the risk of inflation, preserve your money’s value, and eliminate the hassle of monthly payments.
If you’re thinking of selling, the first thing you’ll need is a promissory note buyer or investors. The buyer’s job is basically to put a value on your note, based on the risk it holds. To do this, they look at several factors such as the interest rate, balance, and payment history. They make up for this risk by taking some of the value off your note; that is, if your note is worth $90,000, they might buy it for $82,000.
But why is it still profitable? The concept behind selling is called the time value of money, which says that money is always worth more today than in the future. This is because you can invest your money and make it grow, while a debt instrument tends to lose value because of inflation, interest rates and other economic factors. So taking the example above, you can earn back the $8,000 you paid your promissory note buyer by the time your note would have paid off.
To make the most out of your sale, it’s important to find a good promissory note buyer or investors. A good note buyer can give you top dollar for your note and tell you all about your options. For instance, they should bring up the possibility of partial sales, wherein you sell only part of your note and keep getting monthly payments with the remainder. This is useful when you don’t need a large lump sum, or if you have a good interest rate going on your current note.
There are several buyers out there, so don’t settle with the first one you meet. Approach several buyers and compare their quotes. If you’re selling a mortgage note or land contract, you may have to pay for the appraisal and title policy, but most buyers will give you a quote for free. Don’t waste your time with a promissory note buyer who charges for the most minor services.
Also watch out for unethical practices or buying scams. One common practice is “bait and switch,” in which the promissory note buyer buys your contract and lowers the price later on. Often, they’ll claim that your property buyer had bad credit. Make sure they check your buyer’s credit upfront to avoid getting tricked.
Some promissory note buyer or investors may offer to put your money in a business, or some other venture that can make it grow. While some of them are legitimate, they are rarely available to the general public. A typical scam will promise a “risk-free” investment and above-market return rates in nine months or less. To avoid such rip-offs, look for a licensed broker and steer clear of offers that are too good to be true.
While steady monthly payments can work for some people, cashing in opens more opportunities for investment, purchase, and other uses for your money. Whether you want to buy a house or start a new business, a good promissory note buyer can help you maximize your money’s potential.