Private Credit Investing
Private credit is one of the fastest-growing asset classes in the world — and for good reason. It offers bond-like income with equity-beating yields, shorter durations than private equity, and low correlation to the stock market.
What is private credit?
Private credit is lending that happens outside of public markets. Instead of buying a publicly traded bond, you (or a fund on your behalf) lend money directly to a company, real estate developer, or consumer — and earn interest in return.
Historically, this was the exclusive domain of large banks and institutional investors. Today, platforms like Percent, Yieldstreet, and Groundfloor have opened private credit to retail investors with minimums as low as $10–$500.
The appeal is straightforward: private credit typically yields 8–15% annually — far above investment-grade bonds or savings accounts — with relatively short durations and regular income distributions. The trade-off is illiquidity and credit risk, which is why understanding the asset class before investing is essential.
The Landscape
Types of Private Credit
Direct Lending
IntermediateLoans to mid-market companies
Private funds lend directly to small and mid-sized businesses that cannot access traditional bank financing. Investors earn interest income, typically at floating rates tied to benchmarks like SOFR.
Consumer & SMB Credit
BeginnerRetail and small business loans
Platforms like Percent and Yieldstreet pool consumer loans, merchant cash advances, and SMB receivables into structured notes. Shorter durations (6–18 months) with predictable cash flows.
Real Estate Debt
IntermediateBridge loans and mezzanine financing
Short-term loans to real estate developers and operators — bridge financing, construction loans, and mezzanine debt. Higher yields than equity crowdfunding with senior lien protection.
Structured Credit
AdvancedCLOs, ABS, and specialty finance
Collateralized loan obligations and asset-backed securities pool many loans into tranched structures. Institutional-grade instruments now accessible to accredited retail investors via platforms.
Balanced View
Pros & Cons
Advantages
- Higher yields than public bonds — typically 8–15% target returns
- Shorter durations (6–24 months) than private equity
- Regular income distributions — monthly or quarterly cash flow
- Low correlation to public equity markets
- Senior secured positions provide downside protection
- Accessible via platforms with minimums as low as $500
Risks to Consider
- Illiquid — capital is locked until loan maturity
- Credit risk — borrowers can default on loans
- Most high-yield deals require accredited investor status
- Platform risk — if the platform fails, recovery is uncertain
- Less transparent than public bond markets
- Rising interest rates can affect floating-rate borrowers
Where to Invest
Top Private Credit Platforms
A quick comparison of the most popular platforms for retail investors.
Step by Step
How to Get Started
Check your accreditation status
Many of the best private credit deals require accredited investor status ($200K+ income or $1M+ net worth). If you qualify, you unlock higher-yield platforms like Percent and Cadence. If not, start with Groundfloor or Yieldstreet's non-accredited offerings.
Choose your risk and duration preference
Decide how long you can lock up capital and how much credit risk you're comfortable with. Consumer credit notes (6–12 months) are shorter and more liquid than direct lending funds (3–5 years). Higher yields generally mean higher risk.
Open an account on a platform
Sign up, complete KYC verification, and link your bank account. Most platforms take 10–15 minutes to onboard. Review the platform's track record, default rates, and fee structure before committing capital.
Diversify across multiple deals
Never concentrate in a single loan or borrower. Spread your capital across 10–20+ deals to reduce the impact of any single default. Most platforms make this easy with auto-invest features.
Reinvest your interest income
As loans mature and pay interest, reinvest the proceeds into new deals. Compounding interest income is how private credit investors build meaningful returns over time.
Common Questions
Frequently Asked Questions
What is private credit and how is it different from bonds?
Private credit refers to loans made outside of public markets — directly between a lender (or pool of investors) and a borrower. Unlike public bonds, these loans are not traded on exchanges, which means less liquidity but typically higher yields to compensate.
Do I need to be an accredited investor?
It depends on the platform. Groundfloor accepts non-accredited investors with minimums as low as $10. Percent and Cadence require accreditation. Yieldstreet has a mix of both. Always check the specific offering before investing.
What happens if a borrower defaults?
Most private credit deals are secured by collateral — real estate, business assets, or receivables. In a default, the lender has a legal claim on that collateral. Recovery rates vary, but senior secured lenders typically recover more than unsecured creditors. Platforms handle collections and workouts on your behalf.
How long is my money locked up?
Typical deal durations range from 6 months to 3 years. Consumer and SMB credit notes on platforms like Percent often mature in 6–18 months. Direct lending funds may have 3–5 year lock-ups. Always check the specific term before committing.
How does private credit fit into a portfolio?
Private credit works well as a fixed-income replacement or complement — it offers higher yields than investment-grade bonds with moderate risk. Most advisors suggest allocating 5–15% of a portfolio to private credit, diversified across multiple deals and platforms.
Ready to explore private credit platforms?
Compare the top private credit platforms side by side — minimums, target returns, accreditation requirements, and more.
Educational Content Only: This page is for informational purposes and does not constitute financial, investment, or legal advice. All investments carry risk, including the possible loss of principal. Past performance does not guarantee future results. Always consult a qualified financial advisor before investing.