Episode 66: How Smart Lenders Use Default to Control Every Deal

Most private lenders believe that default is something to be avoided at all costs. The truth? Smart lenders actually use default as a built-in safeguard to stay in control of their money, their deals, and their outcomes.In this episode of Growing the Money, Rich Lennon explains why default isn’t a worst-case scenario; it’s a protection tool. He walks through the exact terms, clauses, and penalties he builds into every loan so that if a borrower slips, he has the power to step in quickly and protect his capital. Want Rich’s complete playbook? You’ll Learn How To:Write strong default terms into your notes and deeds of trustUse penalties and default rates that actually protect you, not just 1–2% bumpsProtect construction draws and add safeguards for big rehab projectsTrigger default through balloon dates, missed payments, or unpaid insurance/taxesCross-collateralize loans so one bad deal doesn’t sink you Who This Episode Is For:New lenders who want clear, protective language in their first dealsInvestors who’ve been lending informally and need stronger safeguardsAnyone serious about protecting their capital while still earning significant returns Why You Should Listen:Default isn’t something to fear; it’s something to plan for. This episode will give you the clarity to write loan terms that keep you in control, no matter what happens with your borrower. You’ll walk away with practical tools to secure your money, protect your properties, and lend with confidence.What You’ll Learn in This Episode: [00:00] Why default is your ultimate safety net [01:00] The legal definition of default and how it protects lenders [02:00] Why low default penalties are a huge mistake [04:00] The 10% construction draw penalty that saves lenders thousands [05:00] Balloon dates: why Rich prefers six months instead of a year [06:00] Missed insurance and property taxes as automatic defaults [07:00] Cross-collateralization: default on one = default on all [08:00] Why secondary liens and owner-occupied loans are deal killers [09:00] How bankruptcy or conservatorship can trigger default [10:00] Why you should design loans to allow defaults by choice, not chanceFollow Rich Lennon here:Website: https://richlennon.com/Facebook: https://www.facebook.com/rich.lennon.121Instagram: https://www.instagram.com/richlennon92/