A private money loan is financing from a private lender or non-bank source rather than a traditional bank or credit union. These loans are secured primarily by the value of the real estate itself, allowing for faster approvals and more flexible qualification than conventional financing.
Underwriting focuses on the property’s value and equity position, rather than exclusively on the borrower’s income documentation or credit history.
Terms are negotiated directly between borrower and lender, often allowing more flexible structures than bank guidelines permit.
Funding is typically faster than conventional loans, since private lenders aren’t bound by the same institutional approval process.
Loans are often shorter-term, commonly used as a bridge to conventional financing, a sale, or a refinance.
Answers to common questions about private money financing.
The terms are often used interchangeably; both describe asset-based lending from non-institutional sources, though specific structures and terms vary by lender.
Speed and flexibility are the main draws - private lenders can often close faster and work with borrowers or property situations that don’t meet conventional bank criteria.
Generally yes, private money loans tend to carry higher rates than conventional bank financing, reflecting the faster funding and more flexible underwriting.
Many private lenders finance a wide range of property types, including ones conventional banks may avoid, though eligibility varies by lender and specific deal.
