What is Private Money Lending?

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If you’re a savvy real estate investor looking for the potential to make higher returns than traditional investments, then private money lending could be an attractive option. Private money lending has become increasingly popular as more investors seek higher returns while taking calculated risks.

In this blog post, we’ll explore what it is and why it’s an attractive alternative to traditional sources of real estate funding.

Table Of Content:

  1. What is Private Money Lending?
  2. Why go with a private money loan?
  3. When to use this type of loan?
  4. Where can I find private money lending?
  5. What are the risks?

What is Private Money Lending?

Private money lending goes by many names, most commonly private money or hard money. These terms broadly describe any individual or company that is not a bank and typically lends money based on non-traditional qualifying guidelines for real estate investments. Based on this increased risk, their terms can be much higher than traditional real estate funding. They fund deals that traditional banks won’t touch, with the money typically sourced from private investors. 

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While you’ll find debates all over the internet about whether or not private and hard money is the same, there is no legal difference between the two terms (in point of fact, they are not legal terms at all). Hard money is the “original” vocabulary, somewhat abandoned due to the Wild West days when the financing industry was less regulated. At the same time, private lending is a newer term that better describes the actual practice as it’s done today.

The term Hard Money Loan is also used to describe a real estate loan that requires a property as collateral.

Why go with a private money loan?

Private money lending gives real estate investors flexibility and power through short-term and long-term real estate investment loans with quick approvals that come with fewer restrictions when compared to standard bank loans. It makes it possible for any savvy investor to capitalize on significant opportunities quickly.

A private money loan typically offers a shorter processing time than traditional loans, helping to speed up the investment process. Plus, with the ability to customize repayment terms and rates, you can tailor the loan to meet your specific needs. With greater control in getting financing, fewer worry-free hoops to jump through, and a high approval rate, private money loans offer numerous advantages that make them a great choice when needing funds for property investments.

When to use this type of loan?

Private money loans are an attractive financing option for real estate investors who want to take advantage of purchasing breaking deals. These types of loans allow investors to close a deal quickly. Private money loans are mainly used when a buyer needs capital quickly or if the seller doesn’t have time to wait for bank approval. 

Additionally, they are best suited for investment properties requiring structural renovations or repairs due to their higher-risk nature. As such, real estate investors should weigh the costs and benefits of using a private money loan and decide if it’s right for their specific situation.

They fall into several different categories, which are used for various purposes, such as:

  • Fix and flip loans
  • Bridge loans
  • Rental Loans
  • Construction Loans
  • Refinance Loans


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Where can I find private money lending?

Private money lending can be found in person and online. When looking for a private lender, it is essential to consider all the options available to choose the right one. Often, people look to friends or family members who may have the financial means to loan them money. Plus, many websites offer private money lending services to connect borrowers with potential lenders. It is highly recommended to research any platform being considered to ensure a safe and secure borrowing experience.

What are the risks? 

Private money lending in real estate carries an inherent risk, as borrowers may not always follow through on loan repayment. 

The risks associated include:

  • The borrower’s creditworthiness,
  • The ability to get interest payments on time, 
  • defaults or insolvency. 

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In addition, because real estate private lenders are often asked to make loans that fall outside traditional banking regulations and guidelines, it can be difficult to protect oneself from losses due to fraud or misrepresentation. Lastly, private real estate lenders tend to underestimate their risk exposure when granting loans under unfavorable conditions. As such, private money lenders must conduct thorough background checks before granting loans and be aware of potential disputes concerning payment terms and other legal issues.


Private lending can be an excellent option for small businesses and novice and experienced real estate investors who need money quickly and don’t want to go through the hassle of dealing with a bank. If you’re looking for a private money loan, contact us and speak to a member of our experienced and qualified team.

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Greg Downey

Greg Downey
Hi, I’m Greg Downey! I’m an expert in real estate and passionate about sharing my knowledge with others. I desire to provide valuable and insightful intelligence, inspiring others to get informed and succeed in the real estate industry.