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Private Lending for Beginners

Posted on February 9th, 2021


How it works

Private money lending is when individuals lend their own capital to other investors while securing the loan with a mortgage against the real estate. Private money lending is an alternative to traditional lending with big banks.

The term can be anywhere from 1-3 years and the borrow amount can range from $50,000-$1,000,000 with an interest rate at 8%-11%.

The payments that are required are typically monthly interest-only payments.

Why use private lending?

Private lenders are much easier to deal with than most big banks. Banks face many state and federal regulations that private lenders do not. These regulations can determine who the bank can lend to and what that profile will look like.

Although private lenders still face state and federal laws, they can be significantly more flexible.

It is much easier to get approved by private lenders as they are able to customize the loans based on a LTV (loan to value ratio) and debt to income levels.

If your credit score and monthly income are not up to a certain level, a bank will deny giving you a loan. In most cases, a private lender will loan you money depending upon the investment.

Private lenders can fund loans much quicker than big banks. If you flip multiple homes per year for example, you certainly do not have time to wait weeks, if not months, to get funding. With private lending, your waiting time for funding is significantly shorter.

Although the interest rates for private loans are more, when it comes to short term loans the ease of approval and quickness of funding allows you to grow your investments that much quicker.

Types of loans

  • Land Development
  • New Construction
  • Single Family Residential (Non-owner Occupied)
  • Remodel/Flips/Rehab
  • Vacant Land
  • Commercial
  • Multi-Family Residential

If borrowing privately is something you are interested in, please contact us or apply for a loan here.