Private money lenders are individuals or companies, not banks, that lend money, often secured by real estate. Hard money loans are private loans based mainly on the value of the property; they close faster than bank loans but usually cost more and have short terms.
Private money is a loan from an individual or a private company rather than a bank. Hard money is a type of private loan that is based mainly on the value of an asset, usually real estate, rather than the borrower's credit history.
Borrowers use private loans when speed or flexibility matters more than the lowest rate: buying a property quickly, renovating before refinancing, or bridging a gap until longer-term funding arrives.
Typical private loan terms
Terms vary widely by lender and deal, so treat these only as a general guide:
- Short terms, often around 6 to 24 months, repaid by sale or refinance
- Interest rates and fees above bank loans, reflecting speed and risk
- Loan size based on the property value or after-repair value, with the borrower contributing a down payment
- Security: usually a mortgage or deed of trust on the property, sometimes a personal guarantee
Before you borrow
Read every term: interest, points and fees, prepayment penalties, extension costs and what happens if the project runs late. Make sure your exit (sale or refinance) works even if it takes longer than planned, and check the lender is properly licensed where that is required.
