Investors hear three terms constantly: hard money, private lender and bank. They overlap more than people think, so here is a plain way to tell them apart and decide which fits a given deal.
Banks and conventional lenders
Banks generally offer the lowest rates, but they are built around personal income, tax returns and debt-to-income limits, and they move at their own pace. Closings often take longer, and properties that need work or investors with many properties can be harder to fit into their boxes.
Best for: borrowers with straightforward income and properties that are move-in ready, who are not in a hurry.
Hard money lenders
“Hard money” traditionally means short-term loans secured by the property, where the property and the deal matter more than your personal finances. They are known for speed and flexibility on properties that need work, with the trade-off of higher rates and fees than long-term loans.
Best for: fast purchases, distressed properties and short-term plans such as a flip or a bridge to a refinance.
Private lenders
A private lender is an investor-focused lender that is not a bank. In practice, the lines blur: a private lender may offer short-term fix and flip and bridge loans (similar to hard money) and long-term loans like DSCR rental loans. The common thread is a focus on the investment property and the investor’s plan.
Best for: investors who want one relationship across a purchase, rehab and long-term refinance.
Side by side
| Bank | Hard money | Private lender | |
|---|---|---|---|
| Speed | Slower | Fast | Fast |
| Underwriting focus | Your income | The property and deal | The property and deal |
| Typical cost | Lowest | Highest | Varies by product |
| Term | Long | Short | Short or long |
| Rehab funding | Limited | Often available | Often available |
How to choose
- Need to close quickly or the property needs work? A short-term investor loan fits.
- Holding a finished rental long term? A DSCR loan or a conventional loan could fit, depending on your income and speed needs.
- Planning a BRRRR? Pair a short-term loan with a DSCR refinance. See our BRRRR financing guide.
Whatever you choose, compare the total cost (rate, points and fees), not just the headline rate, and ask what happens at the end of the term.