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When I started using owner financing to sell my properties – it was a BIG strategic step forward for my business.
By allowing my buyers to make payments to me over several months/years (rather than requiring one lump sum at closing), I could sell my properties MUCH faster and for more money than ever. It also helped create several streams of passive income (and believe me – when money starts coming in while you sleep, it adds a lot of stability to a growing business).
But for all the good it did, it took me a long time to figure out how to collect these monthly payments correctly. From the very first deal, I had a lot of misguided assumptions about how it was supposed to work.
- Whenever I set up a new loan, I collect monthly physical checks from each borrower.
- I would manually track their payments with archaic computer software for every existing loan account.
- When borrowers missed their payments, I would create and send out late notices via snail mail.
- When I needed to communicate with my borrowers, I did it in the slowest, most tedious, most ineffective way possible.
In short – my approach was obsolete, making my life WAY harder than needed.
I was doing things the same way they were done 30 years ago while overlooking some recent innovations in the finance industry that could make this process 10x easier (without any additional cost or effort from me).
As time went on, I eventually started using a loan servicing company, which greatly simplified my life and took a lot of time-consuming work off my plate… but even so, I didn't realize there were some even less expensive, more scalable options available for automating these loan payments and making my life even easier.
A Fully Automated Solution
In my search for a better solution, I found innovative ways to set up a fully automated “set it and forget it” system for collecting loan payments (and it didn't require a loan servicing company to act as the middleman).
One of those ways is to set up an automatic ACH withdrawal from the borrower's bank account with a service called ZimpleMoney.
With ZimpleMoney, you can establish a source of repayment automatically withdrawn from the borrower's checking or savings account (without notifying the borrower of each payment and without requiring their ongoing permission each month).
ZimpleMoney isn't so much a “loan servicing software” as it is a back-office automation product (with the same software functionality built into it).
It's a fantastic solution for real estate investors utilizing seller financing. Still, it's also a great solution for ANYONE who is lending money and wants to track (and fully automate) the repayment of it (e.g. – Car Dealerships, Doctors, CPAs, Trust Companies, Moms and Dads, Rich Uncles, people making 401k loans, etc.)
Setting up a new loan with ZimpleMoney (aff link) is very easy. You can simply enter in the information from your loan agreement (the loan amount, interest rate, duration of the loan, etc.) and it will emulate whatever is in your contract.
When a loan is created, both the lender and the borrower will have their own ZimpleMoney account – so they can log in at any time and check the current status of their loan balance and upcoming payments (not all borrowers will be interested in doing this, but it's available if they ever want to see it).
Several different pricing plans are available at the time of this writing.
Which plan makes the most sense for you? It depends on whether you're an occasional lender or if you regularly extend loans to your customers.
If you're someone like me (who typically has a handful of loans being paid at any given time), the ZimpleMoney Plus or ZimpleMoney Pro “Business Plans” probably make the most sense. The only significant difference between the two is the monthly cost. The “Plus” plan is $20/mo. The “Pro” plan is $35/mo.
What do you get for the higher monthly cost of ZimpleMoney Pro? Besides the slightly smaller setup fee for each new loan account ($35 for each new setup with Pro, instead of $39 for each new setup with Plus), a ZimpleMoney Pro account offers you the ability to be the ACH Merchant. This gives you much more control over creating each new loan account. Rather than simply sending the borrower a link to create their account and fill in their details (as I show in the video above), the borrower can give their details directly to you, and then YOU can create their account for them.
This may not sound like a big deal – but when you're dealing with a borrower who isn't necessarily a “tech-savvy” person (a surprisingly common occurrence these days), the added capabilities of a Pro account can help you eliminate confusion and avoid unnecessary mistakes on the borrower's end, while allowing you to make sure each borrower's account is set up correctly BEFORE the first payment is due. This is a pretty nice thing to have for all the control freaks out there (you know who you are).
Here's a breakdown of the additional costs associated with each type of account.
- Setup Fee (required to create each new loan) – $39 for Plus / $35 for Pro (Note: This fee can be passed on to the borrower as a “closing fees”).
- Transaction Fee – minimum of $3.99 for each regular payment collected and up to $14.99 for every successful transaction (Note: These fees can be passed on to the borrower as “Taxes & Servicing Fees”).
- Insufficient Funds or Returned Items – $15 (when someone puts a stop payment and you try to process it multiple times).
- Notice of Change (NOC) Fee – $4.50 (when the Banking System or Federal System has to modify your account).
Remember, you can also use ZimpleMoney for FREE with a ZimpleMoney Essential plan. This is ideal for someone who wants to test the waters and run a trial with the service. The only downside is – the cost of setting up each new loan is $159 (rather than the significantly reduced cost that comes with a Pro or Plus account).
If you're planning to create new loans on a somewhat regular basis (i.e. – more than 2 or 3 new deals per year), it's pretty easy to justify the cost of a Pro or Plus plan.
Basic vs. Premium Loan Tracker
ZimpleMoney also offers a “Basic Loan Tracker” for all subscribers. It's free to set up, but it functions purely an accounting tool and comes with the following features:
- Manages a loan portfolio and Ledgers
- Alerts, notifications, and reminders
- Prints and mails paper statements, monthly or late statements
- 20 MB of document/file storage
- Access tax reports
- Message posting
It's designed for the active member who wants to manage loan contracts, ledgers, and portfolios manually – so it can be helpful in some instances, but it doesn't come with any of the automation of the “Premium Loan Tracker”
Is ZimpleMoney Right For You?
So what's the verdict? Is ZimpleMoney the right solution for you?
It could be.
As someone who spent years managing their seller-financed deals the wrong way, this service is WAY more sensible than collecting physical checks in the mail each month – there is no question.
The service doesn't necessarily automate every aspect of your loan servicing process (for example, you'll still have to file your own 1098 forms each year – which ZimpleMoney can help with, but it won't complete the entire process for you).
On the same coin, the service is also a lot less expensive than using an actual loan servicing company, especially when you start doing a larger volume of deals and have several loans on the books to cover the cost of your monthly subscription.
From the standpoint of cost-to-benefit, it appears to be very hard to lose with this service – but as always, that decision is yours to make. 🙂