Private Lending in Costa Rica: How It Works for Borrowers

Private lending in Costa Rica means borrowing from individuals or private companies instead of a bank. Most private loans are secured by real estate: the property is the main security, the loan is recorded against it, and the term is shorter than a typical bank mortgage. For property owners who need funds quickly, or who do not fit a bank’s requirements, it can be a practical option when it is structured carefully.

This guide explains how private lending works, how the law applies to lenders, and what to check before you sign. It is general information, not legal or financial advice.

How Private Lending Works

A private property-backed loan starts with the property, not a credit score. The lender reviews the title, the property’s value, and the borrower’s plan to repay. If the request moves forward, attorneys prepare the loan documents, the security is recorded against the property, and the funds are released at closing.

For the lender’s side, GAP’s loan rules explain how each loan is protected by a first-position mortgage and what happens under Costa Rican law if a borrower stops paying: What happens if a borrower doesn’t pay? How your loan is protected in Costa Rica.

With GAP Equity Loans, the standard structure looks like this:

• Loans start at US$50,000, with added paperwork and due diligence above US$1 million.
• Terms run from six months to three years.
• Regular payments are interest-only, and the principal is repaid at maturity.
• No credit score is required, and borrowers of any nationality can apply.
• The lender must hold first-lien position, so existing liens are paid off before or at closing.

What Private Lenders Review

Because the property secures the loan, the review focuses on the collateral and the overall transaction:

• Loan-to-value (LTV): the loan amount compared with the property value. GAP prefers around 30% LTV or less, and 50% is the maximum for the standard product, not the target.
• Valuation: GAP determines the property value used for LTV, with input and acceptance from the lender. An owner’s own estimate is not the approved value.
• Title and liens: who owns the property and what is registered against it.
• Purpose and exit plan: how the funds will be used and how the loan will be repaid at the end of the term.

Read more about what loan-to-value means in Costa Rica.

How the Law Applies to Private Lenders

Private lenders are not banks, but they are not outside the law. Under Costa Rica’s anti-money-laundering rules, people and companies that grant credit in an organized, habitual way must register with SUGEF, the General Superintendency of Financial Entities, with an exemption for very small monthly volumes. SUGEF states that this registration is not an authorization to operate and that its supervision covers only money-laundering and terrorist-financing prevention, not the lender’s business or solvency.

Costa Rican law also sets a maximum annual interest rate for financing, calculated and published by the Central Bank of Costa Rica. Your attorney can confirm how it applies to your loan.

The Same Thing Goes By Several Names

Part of what makes this confusing is that borrowers arrive using whatever term they know from home, and half of them think they are describing different products. Mostly they are not.

• Private lending and private money lending — the same thing. Borrowing from a private lender rather than a bank.
• Hard money loan — the North American term for it. Same idea: the property carries the decision.
• Private mortgage or a private mortgage lender — the loan is recorded against the property, so people reach for the word mortgage.
• Secured loan or collateral loan — describing what backs it.
• Property-backed financing, asset-backed or equity release — the same arrangement described from the property side.
• Alternative financing or a non-traditional loan — usually just means “not a bank”.
• Bridge loan or short-term lending — the same product described by its length, usually where a sale or refinance will repay it.

Underneath all of them sits the same arrangement: a loan secured against real estate, shorter than a bank mortgage, decided on the property and the repayment plan rather than on your income history.

Where the terms genuinely differ is in what people expect from them. Someone asking for a “quick loan” is usually thinking in days; a property-backed loan is faster than a bank but still needs title review, valuation and documents. Someone asking for a “personal loan” often means unsecured borrowing against income, which is a different product entirely and not what this is.

So when you are comparing offers, compare the terms rather than the labels: the rate, the fees, the length, what happens if you repay early, and what happens if a payment is missed.

Private Lending vs. Bank Loans

Banks set their own requirements, which can make bank loans harder for newcomers, and bank loans can take many months, if not longer, to close. Private lending in Costa Rica usually costs more than a bank loan, but it focuses on the property and can close much faster. GAP closes loans within 10 business days once the required documents are complete.

Interest-only payments can lower the regular payment compared with a loan that also repays principal each month. They do not make the loan cheaper overall, because the full principal is still due at maturity.

Costs to Understand

With GAP, borrowers pay all loan fees, and the fees are deducted from the loan proceeds. Ask GAP for your exact figures before you commit, so you know how much cash you will receive. This is an illustration, not a fixed fee. Early repayment carries a penalty, and the amount and conditions depend on the lender and are explained during loan review. After closing, borrowers make their payments directly to the lender.

What to Check Before You Sign

• Work with your own independent Costa Rican attorney.
• Get the interest rate, fees, term, and early repayment penalty in writing.
• Confirm how the security will be recorded and what happens if a payment is missed.
• Make sure you have a realistic plan to repay the principal at maturity.
• Be cautious of anyone who promises approval before reviewing the property.

Frequently Asked Questions

Is private lending legal in Costa Rica?

Yes. People and companies that lend in an organized, habitual way must register with SUGEF for anti-money-laundering purposes, and financing is subject to a maximum annual interest rate published by the Central Bank.

Do I need a credit score for a private loan?

GAP does not require a credit score. The review focuses on the property, the loan amount, and the repayment plan, and supporting documents are still requested.

Can foreigners borrow from private lenders?

Yes. GAP reviews borrowers of any nationality, and Costa Rican residency is not required.

How much can I borrow?

Loans start at US$50,000. The amount depends on the property value GAP determines and the loan-to-value, with 50% as the maximum for the standard product.

How fast can a private loan close?

GAP closes loans within 10 business days once the required documents are complete. Missing documents or extra verification can delay closing.

This article is general information only and is not legal, financial, or tax advice. Every loan depends on property review, documentation, and lender approval.

WhatsApp us at +506 4001 6413 to get started.

Ready to discuss a property-backed loan? Start a loan request, see how it works, or email info@gap.cr.

Article by Glenn Tellier (Founder of CRIE and Grupo Gap)