How Private Lenders Choose Which Loan to Fund

Lending through GAP is not a fund you buy into. You look at specific loans, one at a time, and decide which to fund. That makes the choice itself the most important skill a private lender develops. This guide explains how private lenders choose which loan to fund: what a loan summary shows, the questions to ask, and why saying no is part of lending well.

What you see before you decide

GAP reviews each loan before presenting it to a lender. A summary typically covers:

• the property, its location and its registered title;
• the value used for the loan, which GAP determines with your input and acceptance;
• the loan amount and loan-to-value;
• the term, the rate and the monthly interest payment;
• what the borrower will use the money for, and how they plan to repay.

Every standard GAP loan puts the lender in a first-lien position. Loans start at US$50,000, and loans above US$1 million involve additional documentation and due diligence.

Start with loan-to-value

Loan-to-value tells you how much value stands behind your money. GAP prefers around 30% or less, and 50% is the maximum. The lower the number, the more room there is for price changes, selling costs and time if the property ever had to be sold. Land is reviewed on stricter terms than a house, usually at a lower loan-to-value.

Then look at the property

Ask whether the property would sell at a realistic price in a reasonable time. Location, access, condition and the type of property all matter. Many lenders prefer areas they know, or property types they understand, such as homes in established areas.

Read the rate in context

Lender rates range from 9% to 16% a year. Loans around 9–10% usually come with more conservative collateral and leverage, while higher rates tend to reflect something about the loan that calls for more return. The rate alone does not tell you how well a loan is secured; it is one piece of the file.

Check the term and the exit

Terms run from six months to three years, with monthly interest-only payments and the principal due at maturity. Make sure the term fits when you want your money back, and ask how the borrower will repay: a sale, a refinance or other funds. A clear, believable exit is one of the best signs of a good loan.

Decide how to spread your capital

With a larger amount to lend, several smaller loans limit how much any one loan can affect you. Funds and other professional capital providers often set rules, such as a maximum loan size; see how fund allocations work.

Do your own checks, too

• Have your own attorney review the loan documents before you fund.
• If you plan to lend as an organized, habitual activity, understand SUGEF registration. Law 7786, article 15 bis, requires it for granting credit in an organized, habitual way using accounts at supervised financial entities, with an exclusion for activity averaging US$5,000 a month or less. Read the SUGEF registration overview.
• Remember that what protects you is the property, secured by a first-degree mortgage.

Saying no is normal

Deciding which loan to fund also means deciding which ones to pass on. You do not have to fund any loan you are shown. Passing on a loan that does not fit your comfort level, your timeline or your preferred locations is a normal part of lending, and the next one may suit you better.

Frequently Asked Questions

Who decides which loan to fund?

The lender. GAP reviews and presents loans, and each lender decides whether to fund.

Is a 16% loan better than a 9% loan?

Not automatically. Higher rates usually reflect more risk or more work in the file. Compare the loan-to-value, property and exit, not just the rate.

Can I help set the property value?

Yes. GAP determines the value used for the loan with the lender’s input and acceptance.

Do I need to live in Costa Rica to choose and fund loans?

No. Lenders of any nationality can lend through GAP, and residency is not required.

This article is general information only and is not legal, financial or tax advice. Legal references summarize Costa Rican law as published in SCIJ. Every loan is secured by a first-degree mortgage registered in the National Registry.

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