When it comes to getting a loan, especially a loan for something big like a piece of real estate, many people turn either to banks, or to hard money lenders. Banks have loan officers who will evaluate a candidate based on their credit history, their current worth, income, and similar factors. Banks will often have specific terms for their loans, though, and those terms may not be open to negotiation. Hard money lenders, by contrast, are money lenders that are not banks, but which still operate as loan companies. Hard money lenders often use the same criteria for deciding who gets a loan as a bank, but tend to consider clients that a bank may have turned down, or projects which fall outside the scope of what a bank is comfortable lending money for.

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Private lenders, on the other hand, are just private citizens (or groups of them) who offer to loan you the money based on their own terms. A private loan might come from a friend, a business, a family member, or even from someone who sees your project as an investment from which they hope to reap a reasonable return. Unlike banks or hard money lenders, the terms laid out for a private money loan need to be worked out explicitly between you and whoever is lending you the money for your project.

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Each option has its advantages and disadvantages. Private loans are more flexible, for instance, and they can often be much more flexible for the borrower. Additionally, private loans may be available even if a bank or hard money lender won’t give you a loan because of your credit history (or lack thereof), or because the project isn’t deemed a solid enough investment for a business to risk its capital on. Not only that, but private loans are much more negotiable, and the time on the loan may be far shorter than on a hard money loan, which is ideal for those looking for short-term projects (such as buying, then flipping, a home).