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Private Lending FAQs

Who can I not lend to?

All IRAs have a list of people who are disqualified from certain interactions with that account (called Prohibited Transactions). Keep in mind that any entity that is owned or controlled by a Disqualified Person or combination of Disqualified Persons may also be disqualified. Your IRA cannot make a loan to yourself or any Disqualified Person or entity. Visit this page for everything you need to know about disqualified persons or prohibited transactions.  

How does a borrower deposit money into my IRA?

The borrower needs to ensure that all principal and interest payments go directly back to your retirement account, not to your personal bank account. 

Is an annual Fair Market Valuation required?

Per IRS regulations, each retirement account must be valued annually.  Once per year, NDTCO accounts that hold promissory notes must complete a Fair Market Valuation (FMV). This can be done by logging into your NDTCO Portal, clicking on the take action button to the right of the asset name in the Overview page and then choosing valuate.  

When the unsecured loan is ready to be repaid in full, what action is needed?

When the loan is ready to be repaid in full, please complete a Payoff Statement from the Portal Overview page, under the “take action” button.    

  • A payoff statement must be completed when the final payment for the note is received so that the note can be removed from your account in a timely fashion.  
  • The final payment will not be deposited into the IRA holder’s account until New Direction Trust Company has a payoff statement.  
  • The final payment needs to come to NDTCO. We need both the Payoff statement and the payment before we can remove the asset. Any asset in the account at the time of annual billing will be assessed an annual administration fee. Annual administration fees are not refundable or pro-rated.    

Am I required to attach collateral to the loan?

The IRA holder chooses the borrower and negotiates the specifics of the loan. One of the key decisions is whether to attach collateral to the loan. The IRS allows the IRA holder to decide whether or not the loan will be secured by collateral and, if so, what the collateral will be. Not all loans require collateral, and leaving a note unsecured is a decision that falls upon the account holder. If the account holder chooses a secured loan, it is the account holder’s responsibility to record any associated Deed of Trust and then file the release of Deed of Trust once the loan is paid off.  

Due diligence on the borrower is the task of the IRA holder. Considerations during the due diligence process may include making sure the borrower is in a position to pay the loan off or making certain the loan document gives the IRA a clear path to the collateral in the event of default