What is a private money loan?
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.
How It Works
- 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.
Who Uses This Loan
- Borrowers who don’t fit conventional underwriting boxes (self-employed, recent credit events, unconventional income)
- Investors needing speed that bank financing can’t match
- Buyers competing on time-sensitive deals, auctions, or off-market purchases
- Anyone using real estate equity as leverage where traditional financing is too slow or restrictive