Promissory note buyers are companies or individuals who purchase promissory notes on behalf of other investors. They offer promissory note investors a way to earn interest and income without relying on the traditional banking industry.
They also can provide a method for creating an easy transition in seller-financed deals. For example, they can help a buyer who is selling a house with an existing mortgage to take back the mortgage from a current owner and pay it off.
Some note buyers also offer partial purchases of a promissory note, purchasing the rights to a certain number of payments at a discount from the face value of the note. This allows the note holder to raise a lump sum of money quickly.
These types of investments are usually only offered to investors who can handle the risks and have the funds to buy the notes. Invest in these types of notes only with the guidance of a licensed or registered securities broker or lender.
Investors should be aware that these types of notes are not covered by the SEC. They are not a good substitute for long-term Treasury bonds or FDIC-insured certificates of deposit.
There are a few other things to watch out for when investing in promissory notes:
Beware of “risk-free” returns and “insured” or “guaranteed” notes. These claims are commonly used by con artists to lure investors.
The risk of these types of notes is that the issuing company will not be able to make principal and interest payments on them.