A Private Lender is an investor who makes loans secured by real estate, typically charging higher rates than banks but also making loans that banks would not make, funding more quickly than banks and/or requiring less documentation than banks.

Private Lenders exist because many real estate investors need a quick response / funding to secure a deal when looking for a real estate loan. Banks and other institutional lenders that offer the lowest interest rates don’t provide the same combination of speed and transparency in their decision-making process, along with quick access to capital.

Private Loans can have a number of advantages over traditional bank financing including:

A simpler application process and quicker approval/disapproval decision

Less scrutiny of the borrower’s personal financial situation, including income and historical tax returns, compared to bank loans.

Borrowers can allocate less time to seeking financing and instead concentrate on other business

Most private money lenders do not expect perfect credit and substantial amounts of disposable income from borrowers, but instead focus on the merits of the specific deal under consideration

Self-employment is acceptable to private lenders, whereas many banks view self-employment negatively and strongly prefer lending to professionals with very steady income.