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Experience:  Specialize in all phases of commerical and residential real estate transactions
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Do I have to have a license to make a hard money loan in California?

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Do I have to have a license to make a hard money loan in California?
Submitted: 6 years ago.
Category: Real Estate Law
Expert:  Real Estate Expert replied 6 years ago.

Dear JACUSTOMER-1cia94dc,


You do not need a license to lend money in California if you are an occasional lender.The loan statutes do apply here whether you are licensed or not.


Customer: replied 6 years ago.
Could you please clarify your answer.
Expert:  Real Estate Expert replied 6 years ago.
In your situation NO you do not need a license. However loan laws of California still apply and this does not mean that there are not certain restrictions in California dealing with lending practices and interest rates.


In regard to usury, a loan to be used primarily for home improvement or home purchase is not regarded as a loan for personal, family or household purposes. With these loans and for any other loans which are not for personal, family or household purposes, the allowable rate is the higher of 10% or 5% over the amount charged by the Federal Reserve Bank of San Francisco on advances to member banks on the 25th day of the month before the loan (if the agreement to loan and the actual lending of the money are in different months, the 25th day of the month before the earlier event is used).



Customer: replied 6 years ago.
The loan I made was 4 points and 13%. It is much higher than regulations quoted above.
Am I in trouble? What should I do?
Expert:  Real Estate Expert replied 6 years ago.

You are not in trouble. The laws in California regarding usury, lending practices and lenders are continually in a state of flux. Generally speaking, courts in California will strike down as illegal and unenforceable in its entirety any loan agreement that calls for an interest rate to be paid above and beyond that which explicitly is permitted by the laws and regulations of the state. However, if your friends agreed to pay this interest and do not have a problem with it then there is not an issue. To be on the safe side if you've any specific questions about usury laws in California, you should consult a local attorney who specializes in banking law. Additionally, I do not want to provide you with any inaccurate advice as the laws in Calforina are always changing.


However, your initial question of do you need a license is no but just be aware of lending laws.



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