Data recently released by Guidant Financial Group indicates that private loan investments inside self-directed IRAs has increased by 131.1% since 2005. By comparing a 2005 survey of Guidant self-directed IRA clients against a similar 2007 survey, the financial services company was able to document what it had already suspected: a dramatic spike in private lending apparently in response to today’s tight credit market.
It’s not surprising that individuals and businesses are turning increasingly to private lenders who can often beat the interest rates and qualifying standards of skittish lending institutions.
The fact that Guidant’s clients, who can self-direct IRA funds into both traditional and non-traditional investments, are choosing notes and/or personal loans over many stock market investments is further evidence that, during shaky economic times, investors place their faith (and funds) in potentially more secure assets. Most of these loans (i.e., second mortgages, hard-money loans, etc.) are secured by real property. And, even if that property isn’t worth quite what is used to be, it can still provide a level of security superior to stock market investments . . . which is the reason many inventors turned to self-directed IRAs in the first place.
