Private Lending


The main benefit of private lending in an IRA is that all the interest repaid to the IRA is tax-free. The investor has complete control over the lending process, setting the note’s interest rate and terms. The investor can also specify the closing agent and collateral required.

Midland makes the process of private lending in an IRA easy.



Types of Private Lending


Unsecured Notes

Unsecured notes are not backed by collateral and often carry higher interest rates on the loan amount. One might consider an unsecured note for a friend or a non-disqualified relative. Unsecured notes involve a greater risk—and sometimes reward—than a secured note.




Secured Notes

Secured notes are backed by collateral, such as deeds of trust or the property itself. This backing provides the lender with increased assurance of return of the loan amount and interest. One of the attractions of secured notes for many investors is their collateral instruments that protect if the loan defaults. The underlying collateral, interest rates, and amortization are all agreed upon between the IRA owner and the borrower. The lender can choose risk and tolerance levels. Self-directed retirement accounts can also participate in fractional ownership of notes and purchase existing, discounted, or  distressed notes.

Private Lending Process

Private Lending Steps Infographic No Background

Learning by video

We recorded a session all about private lending in an IRA and broke it down into small videos of 1-5 minutes each. Let us take you through the areas of private lending that you want to learn about!

Private Lending Due Diligence Questions to Ask Yourself:

  • Does the investment seem sound?
  • Are there any glaring red flags?
  • Am I going to make a good, but realistic return on investment?
  • Do the returns seem too good to be true?
  • Is there something the company or individual is not telling me that could hurt my investment later on?
  • Is the company or individual asking me to invest all of my retirement account funds?
  • Can I lose money with this investment?
  • Is this investment going to serve the long-term purpose of my retirement account?
  • How easy will it be for me to liquidate the investment if I need access to cash?
  • How long has the entity that is offering the investment been in existence?
  • Is this a regulated investment?
  • Is this investment in litigation?
  • Does the investment tout guaranteed returns, regardless of market conditions?
  • Does the investment refuse to provide annual valuations?

Due diligence should be comprehensive and thorough. Research the investment opportunity and look out for your own interests. If something doesn’t “feel” right with the information you’ve researched, trust your instinct and say, “no.”

Midland is not a fiduciary, so we cannot provide any legal or tax advice. We cannot determine if your investment is right for you. Midland can only provide information regarding the requirements in order to administer the investment. It is up to you to conduct due diligence.



View case studies in which Midland clients invested in private lending. Get an idea of what you can accomplish in your retirement account with private lending.


Frequently Asked Questions

What are the minimum and maximum interest rates I can charge?

Typically the interest rate would be the current prime rate plus one. Please check State Usury Laws for maximum interest rates.

Does the loan have to be secured?

No. Loans can be secured or unsecured.

If I can’t loan to myself, can I loan to a friend if they are going to return the favor? For example A’s IRA lends to B; B’s IRA lends to A.

You can lend money to a friend as an investment. The investment should not be structured in any way in which you benefit. For further clarification, you should speak with a financial or legal advisor.

Can I loan to my child?

Children are a disqualified party and cannot borrow money from your IRA.

What criteria does Midland require for the note?

The note should have a clearly stated interest rate and maturity date. It should include the principal amount and repayment terms. Finally, it should name the Lender (Midland Trust Company as Custodian FBO Client Name, Client Account #) and the Borrower. We may require an original pen-signed note.

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Private Lending Articles