Five Common Private Lending Strategies Inside a Self-Directed IRA

Did you know that one alternative investment you can use in a Self-Directed IRA is…a private lending strategy? It can be especially helpful for investors who want income in their IRA, but don't necessarily want to tie their IRA to a real estate asset, or dividend-paying stocks. But let's get specific. What kinds of loans can you use in a Self-Directed IRA? Here's what you'll need to know about five unique strategies.

Secured vs. Unsecured Loans: A Note About Private Lending

Before we get too specific, it’ll help to understand the basic difference between secured and unsecured loans. A secured loan is backed by collateral, such as real estate, equipment, or a vehicle (we’ll talk about that in strategy #5). But the basic to understand is this: if the borrower defaults, the IRA may have a claim on that asset.

Unsecured loans don’t have that safety net. They rely on the borrower’s promise to repay, often with higher interest to reflect the added risk. Inside a Self-Directed IRA, many investors lean toward secured loans because they like knowing there’s something tangible tied to the note.

Strategy #1: Mortgages and Trust Deeds

Mortgages and trust deeds are some of the most common private lending investments inside a Self-Directed IRA. In this setup, the IRA acts as the lender, and the borrower uses real estate as collateral. Payments of principal and interest flow back into the IRA.

Investors often like this strategy because it feels familiar and structured. You’ll clearly define the terms in advance, which also gives you confidence. Even more, it can be a way to earn steady income without owning or managing the property itself.

Strategy #2: Private Business Loans

Private business loans allow a Self-Directed IRA to lend directly to a company. These loans may be secured by business assets or structured as unsecured notes, depending on the agreement. Interest rates often reflect the additional risk involved.

This strategy appeals to investors who understand small businesses and want exposure without equity ownership. The IRA earns interest, while the business gains access to capital it might not find through traditional banks.

Strategy #3: Commercial Real Estate Development with Private Lending

Some investors use their Self-Directed IRA to fund commercial real estate development loans. These are typically short-term loans tied to construction or improvement projects. They may be secured by the property being developed.

Because development projects carry more moving parts, the potential returns are often higher. Investors who choose this route usually focus on strong documentation and conservative loan terms to balance risk and reward.

Strategy #4: Car Notes

Car notes are another form of asset-backed lending that can work inside a Self-Directed IRA. In this case, the vehicle serves as collateral for the loan. Payments will be made over a defined period, with interest returning to the IRA. So, in that way, it’s just like any other loan.

Strategy #5: Hard Money Lending

Hard money lending is often associated with real estate investors who need fast funding. A Self-Directed IRA can serve as the lender, offering short-term loans secured by property. These loans typically come with higher interest rates and shorter durations.

The appeal here? Twofold: more speed and more freedom. Borrowers value quick access to funds, while lenders appreciate clearly defined exit timelines. As always, careful underwriting matters.

Private lending inside a Self-Directed IRA can create income without owning assets outright. Interested in learning more about Self-Directed IRAs?  Contact us at 866-7500-IRA (472) for a free consultation or download our free guide.