Private lenders often compete for your business, which means you'll likely receive multiple offers with varying terms, rates, and conditions. The challenge isn't finding capital—it's knowing which offer actually serves your deal best. This guide walks you through the comparison framework serious real estate investors and business owners use.
The Core Numbers: Rate, Term, and Fees
Start with the all-in cost, not just the interest rate. A 12% rate sounds reasonable until you factor in origination fees (typically 1–3% of the loan amount), processing fees ($500–$2,500), appraisal costs ($400–$800), and exit fees (sometimes 1–2%).
For example, two offers on a $300,000 fix-and-flip:
- Offer A: 11% rate + 2% origination fee + $1,000 processing
- Offer B: 13% rate + 0.5% origination fee + $500 processing
Over a 12-month loan, Offer A costs roughly $34,800 in interest plus $6,500 in fees ($41,300 total). Offer B costs roughly $39,900 in interest plus $1,500 in fees ($41,400 total). They're nearly identical, but one has lower upfront friction.
Request a complete Loan Estimate or Truth in Lending statement. If a lender won't provide it, move on.
Terms and Flexibility Matter More Than You Think
Private lenders vary wildly on exit strategy flexibility. Some enforce strict 12-month terms; others allow extensions or payoff without penalty. Some require monthly interest payments; others allow accrual (you pay everything at the end).
Ask about:
- Prepayment penalties. Can you pay off early without losing money? Most legitimate lenders allow it.
- Extension options. What's the cost if your deal needs 90 extra days? (Typical: an additional 0.75–1% for each 30-day extension.)
- Interest-only payments. Does the lender require them, or can you capitalize interest into the backend?
A deal that flips in 9 months doesn't benefit from a lender offering flexible 18-month terms. But a development project needing 14–16 months absolutely does.
Loan-to-Value and Advance Amounts
Private lenders typically lend 60–75% of the after-repair value (ARV) on investment properties, though some go to 80% for experienced sponsors. Residential purchase loans might hit 85–90% LTV.
Compare apples to apples:
- What's their LTV calculation based on? Purchase price, ARV, or current market value?
- Will they fund the full amount at closing, or in draws tied to contractor milestones?
- Draw-based funding is slower but reduces their risk. Lump-sum funding is faster but means you're managing cash flow carefully.
If you need $150,000 and one lender advances it all at day one while another releases $50,000 at closing and $100,000 at 30% completion, the timeline differences are significant.
Due Diligence on the Lender Itself
Check whether the lender is registered, has a real office, and maintains professional liability insurance. Private money doesn't mean unaccountable. Run a NMLS lookup (mortgage lenders should be licensed in your state) and verify past deals through references.
Ask directly:
- How many loans have they funded in the last 12 months?
- What's their average loan size and hold period?
- Do they have experience with your property type (residential fix-and-flip, commercial, raw land, bridge loans)?
Lenders who specialize in your niche understand the risks and move faster. A lender experienced in ground-up commercial construction won't handle your single-family flip efficiently.
Speed of Funding
Private money's main advantage is velocity. But not all lenders are equally fast. Some close in 5–7 days; others take 15–20.
Factor in:
- Underwriting timeline (typically 3–5 days)
- Appraisal turnaround (5–7 days in competitive markets, longer elsewhere)
- Document preparation and closing (2–3 days)
If you're chasing a specific property with a tight timeline, confirm the lender's realistic closing window in writing before signing a term sheet.
Creating a Comparison Scorecard
| Factor | Offer A | Offer B | Offer C | |--------|---------|---------|---------| | Total Cost (12 mo.) | $41,300 | $39,800 | $43,200 | | LTV | 70% | 75% | 65% | | Interest-Only? | Yes | Yes | No | | Extension Cost | 1% | 0.75% | 1.25% | | Days to Close | 10 | 14 | 7 | | NMLS Licensed | Yes | Yes | No |
Weight factors by your specific deal. Speed matters less if you're buying at auction; LTV matters more if you're tight on your own capital.
Frequently Asked Questions
Q: What's a realistic interest rate range for private money right now? Hard money for investment properties typically ranges 10–15% depending on loan size, asset quality, and your experience. Peer-to-peer personal loans run 6–36%. Always compare the all-in cost, not the rate alone.
Q: Should I always take the lowest rate offer? No. A slightly higher rate with faster funding or more flexibility might cost less overall or allow you to close a time-sensitive deal. Run the full math including fees, terms, and timeline.
Q: Can I negotiate terms with a private lender? Yes, especially if you have multiple offers. Experienced lenders often adjust origination fees or extension terms to win competitive deals. Never accept the first proposal.
Ready to compare vetted private lenders side-by-side? Mercoly helps you find and evaluate trusted private money and peer lending providers in one place, saving research time and helping you identify the best fit for your deal.