There’s a lot of confusion about private money loans. People often wonder if they’re different from hard money or bridge loans. The truth is, those are just different names for the same type of financing—loans provided by private, non-bank lenders.
How Private Money Works
Private money comes from private lenders, like investment groups or funds, rather than banks or government programs. These lenders aren’t weighed down by heavy regulations, so they can approve loans quickly and with minimal paperwork. That makes private money a popular choice for real estate investors who need to act fast.
Common Uses
Investors use private money for a variety of reasons. Some buy, renovate, and resell properties in “fix and flip” projects. Others hold properties for rental income. Private money can also help borrowers in challenging situations—such as avoiding foreclosure or bridging a gap until traditional financing becomes available. Because these loans focus more on the property’s value than the borrower’s credit, they’re often accessible to people who might not qualify for conventional financing.
Loan Terms
Private money loans are primarily asset-based, meaning the lender evaluates the property itself and its potential resale value. Interest rates are generally higher than traditional loans, typically ranging from 7% to 13%, and loan terms are short—usually 6 to 24 months. Borrowers often need a clear plan for repaying the loan, called an “exit strategy,” which might include selling, refinancing, or renting the property.
Why Private Money Can Help
While private money loans aren’t the cheapest option, they’re fast, flexible, and ideal for seizing opportunities when timing matters. With the right property, a solid plan, and sufficient collateral, private money can provide a valuable shortcut to achieving real estate investment goals.