Private Money vs. Hard Money: What's the Difference?

Understanding the difference between private money and hard money can help you choose the right financing option for flipping houses.

Private Money Loans are sourced from individuals, often friends, family, or private investors. The terms of private money loans are flexible and negotiable, including loan duration, interest rates (usually 6-12%), repayment terms, and collateral requirements. Since you are dealing directly with individuals, you might negotiate more favorable conditions tailored to your specific needs. However, funding may be slower and less predictable as it depends on individual relationships and personal trust.

Hard Money Loans come from professional lenders or specialized lending companies focusing specifically on real estate investments. Interest rates typically range from 8-15%, with standardized terms and clear processes. The greatest benefit of hard money is reliability and speed; approvals and funding often occur within days, making them suitable for competitive real estate markets. Hard money lenders primarily assess the property’s future market value (ARV) rather than your personal credit history, which makes them accessible for investors with credit challenges.

Choose private money if relationship-driven flexibility and personalized terms matter most. Opt for hard money when speed, reliability, and streamlined processes are essential to your investment strategy.