When you, a borrower, go to a lender with some solid collateral, most lenders rush to make a load to you. Why? Because lenders know that if the loan goes bad, they can sell the collateral and get their money back. And – as you probably know – every lender loves money and wants to have every loan repaid in full and on time!

Meanwhile, of course, they’re earning interest on your loan. And earning interest is their biggest goal in life, after helping their borrowers.

“But”, you say, “I don’t’ have any stocks or bonds to pledge for my down payment loan. And I don’t have any other assets. What can I do?” Here’s your quick, practical answer:

Find someone who has suitable collateral and who is sympathetic to your real estate ambitions. This person could be a friend, a relative, or a business partner. To find such a person, sit down with pencil and paper and list friends, relatives, and businesspeople who have assets – stocks bonds, and other holdings – you could use as collateral to get your down payment loan for the income real estate you want.

Contact each “target” person who might be willing to pledge their collateral for your down payment loan. Show them a short business plan detailing how much money you need, for what purpose, and how you would repay it. If you don’t have anyone you can contact, then take the next step.

Advertise in local papers, newsletters, and real estate publications saying:

       Collateral needed for real estate purchases. Will pay good interest rate. Collateral secured by well-located real estate  For info, call 123-4567 after 8 P.M. daily.

Show your business plan to interested investors. You may find a mentor who will fund all your real estate deals. It has happened to some real estate investors I know. And it could happened to you! You never know until you try!

Ask any stock brokers you know if they have wealthy clients seeking to earn a higher return on their holdings. When presented with a good business plan showing details of your real estate business, such people may be willing to pledge their assets as collateral for your loan. The typical one-time fee for such a service is 5 percent of the face value of the pledged assets. Thus, with $100,000 pledged, the one-time fee is $5,000.

Be confident that you can find collateral for your secured down payment loan. But you must look for it in a dedicated way.

Enhance Your Credit with a Guarantor

Another way to get a secured loan is to offer a guarantor who has collateral that can be pledged. Thus, when your credit is not the strongest – with a 500 or lower credit store – you’ll need help to get your secured down payment loan. You can make your credit stronger – called credit enhancement – by getting a person to guarantee the repayment of your loan, while pledging some type of asset to make your lender feel more secure. Thus your present a much stronger credit picture to your lender. Why?

Because your lender has two signatures on your loan application – yours and your guarantor’s – plus a pledge of some type of asset. Your chances of getting your loan increase enormously with a guarantor. You can find guarantors using the methods given above for finding people to pledge stocks and bonds for your down payment loans.

Use a Home Equity Loan for Your Down Payment

A home equity loan is money you borrow using your ownership portion of your home as collateral for your loan. For example, let’s say you have a home with a current market value of $100,000. you owe $40,000 on your first mortgage on the house. Thus:

Market Value      $100,000
Existing mortgage     40,000
Your equity = $100,000 - $40,000 =   60,000

Today, some lenders will loan up to 125 percent of your equity in your home. Thus, you could borrow:
   1.25 x $60,000 equity = $75,000

Having $75,000 available for the down payment on a good income property puts you in an excellent position to get the building or land of your choice. And it allows you to get income real estate on zero cash – a method giving you infinite leverage in this great business of building your wealth in real estate.

If you don’t owe real estate on which you can get a home equity loan, consider:

• Asking a relative or friend to get a loan for you using their property as equity for the loan.
• Asking a business associate, partner, or acquaintance to pledge their home for your loan, rewarding them financially or in some other way they feel is worthwhile.

The good news for you about home equity loan is that the lenders love them because the real estate collateral just goes up in value as time passes. They used to lend only 75 percent of the equity in a house. But now some of them go as high as 125 percent of the equity. Why? Because:

Real estate is one of the best types of collateral for any loan. Hence lenders love to make home equity loans on well-located real estate almost anywhere in the world.

So if you can arrange to get a home equity loan for your down payment on income real estate, go for it! Your interest rate will be lower than a personal loan and you can get a much longer term – 15 year as compared to 5 years. You really can’t beat real estate secured loans for down payment money!