--- title: self directed IRA loan rules description: Understand self directed IRA loan rules, how a self directed IRA loan works, whether a self directed IRA can loan money, and the basics of IRA lending. image: https://blog.preferredtrustcompany.com/hubfs/PTC%20Blog%20SDIRA%20loan%20rules%2012.26.25%201200x628.png --- [Skip to content](https://blog.preferredtrustcompany.com/blog/self-directed-ira-loan-rules#main-content) [![](https://blog.preferredtrustcompany.com/hs-fs/hubfs/Horizontal%20Logo-HighRes%20JPG%20cropped-1.jpg?width=325&height=91&name=Horizontal%20Logo-HighRes%20JPG%20cropped-1.jpg)](https://preferredtrustcompany.com/) - Get Started Show submenu for Get Started - [Schedule Consultation](https://info.preferredtrustcompany.com/preferred-trust-company-consultation) - [Open an Account](https://preferredtrustcompany.com/self-directed-ira-applications/) - [About Preferred Trust](https://preferredtrustcompany.com/about-ira-custodian/) - [Client Testimonials](https://preferredtrustcompany.com/client-testimonials/) - SDIRA Resources Show submenu for SDIRA Resources - [Why Self-Direct?](https://preferredtrustcompany.com/why-self-directed-ira/) - [Inherited IRAs](https://preferredtrustcompany.com/inherited_iras/) - [Prohibited Transactions](https://preferredtrustcompany.com/prohibited_transactions/) - [IRA LLC](https://preferredtrustcompany.com/checkbook-ira-llc/) - [Frequently Asked Questions](https://preferredtrustcompany.com/faqs/) - [Retirement Industry Glossary](https://preferredtrustcompany.com/retirement-industry-glossary/) - [Media](https://preferredtrustcompany.com/media/) - [Blog](https://blog.preferredtrustcompany.com/blog) - Community Show submenu for Community - [Company Partnership](https://preferredtrustcompany.com/company-partnership/) - [Investment Resources](https://preferredtrustcompany.com/resources-new/) - [Investment Services](https://preferredtrustcompany.com/investment-services/) - Forms Show submenu for Forms - [Forms](https://preferredtrustcompany.com/forms/) - [Fee Schedule](https://preferredtrustcompany.com/fee-schedule/) - [Pay Your Fees](https://preferredtrustcompany.com/shop/) - [Login](https://icp.infovisa.com/0234) Open main navigation Close main navigation - Get Started Show submenu for Get Started - [Schedule Consultation](https://info.preferredtrustcompany.com/preferred-trust-company-consultation) - [Open an Account](https://preferredtrustcompany.com/self-directed-ira-applications/) - [About Preferred Trust](https://preferredtrustcompany.com/about-ira-custodian/) - [Client Testimonials](https://preferredtrustcompany.com/client-testimonials/) - SDIRA Resources Show submenu for SDIRA Resources - [Why Self-Direct?](https://preferredtrustcompany.com/why-self-directed-ira/) - [Inherited IRAs](https://preferredtrustcompany.com/inherited_iras/) - [Prohibited Transactions](https://preferredtrustcompany.com/prohibited_transactions/) - [IRA LLC](https://preferredtrustcompany.com/checkbook-ira-llc/) - [Frequently Asked Questions](https://preferredtrustcompany.com/faqs/) - [Retirement Industry Glossary](https://preferredtrustcompany.com/retirement-industry-glossary/) - [Media](https://preferredtrustcompany.com/media/) - [Blog](https://blog.preferredtrustcompany.com/blog) - Community Show submenu for Community - [Company Partnership](https://preferredtrustcompany.com/company-partnership/) - [Investment Resources](https://preferredtrustcompany.com/resources-new/) - [Investment Services](https://preferredtrustcompany.com/investment-services/) - Forms Show submenu for Forms - [Forms](https://preferredtrustcompany.com/forms/) - [Fee Schedule](https://preferredtrustcompany.com/fee-schedule/) - [Pay Your Fees](https://preferredtrustcompany.com/shop/) - [Login](https://icp.infovisa.com/0234) [All posts](https://blog.preferredtrustcompany.com/blog/all) October 7, 2026 # How Self Directed IRA Loan Rules Work By  [Preferred Trust](https://blog.preferredtrustcompany.com/blog/author/preferred-trust)  ·  3 minute read [Self Directed IRAs](https://blog.preferredtrustcompany.com/blog/what-is-a-self-directed-ira-and-how-does-it-work) empower investors to take control of their [retirement savings](https://blog.preferredtrustcompany.com/blog/blog/5-ways-to-help-boost-your-retirement-savings) and invest in [alternative assets](https://blog.preferredtrustcompany.com/blog/top-5-alternative-assets-you-can-hold-in-a-self-directed-ira) such as [real estate](https://blog.preferredtrustcompany.com/blog/blog/how-a-self-directed-ira-works-for-real-estate), private lending, [precious metals](https://blog.preferredtrustcompany.com/blog/blog/precious-metals-gold-rush-or-fools-gold), [LLCs](https://blog.preferredtrustcompany.com/blog/ultimate-guide-to-ira-llcs), and more beyond stocks and bonds. But with that flexibility comes a set of important IRS rules to follow. In this guide, we’ll break down how Self Directed IRA loan rules work, what lending and borrowing look like inside an SDIRA, and how to avoid [prohibited transactions](https://blog.preferredtrustcompany.com/blog/watch-out-for-prohibited-transactions-with-your-self-directed-ira) that could jeopardize your tax-advantaged status. **![PTC Blog SDIRA loan rules 12.26.25 1200x628](https://blog.preferredtrustcompany.com/hs-fs/hubfs/PTC%20Blog%20SDIRA%20loan%20rules%2012.26.25%201200x628.png?width=800&height=419&name=PTC%20Blog%20SDIRA%20loan%20rules%2012.26.25%201200x628.png)** ## **A Self Directed IRA Quick Review** A [Self Directed IRA (SDIRA)](https://blog.preferredtrustcompany.com/blog/sdira-invest-for-retirement) is an individual retirement account that allows full investment flexibility across a wide range of assets, including real estate, [private equity](https://blog.preferredtrustcompany.com/blog/asset-management-vs-private-equity), [promissory notes](https://blog.preferredtrustcompany.com/blog/blog/why-do-unsecured-promissory-notes-get-a-bad-rap), and private lending, all while retaining the tax advantages of [traditional or Roth IRAs](https://blog.preferredtrustcompany.com/blog/difference-roth-ira-and-ira). [Wikipedia](https://en.wikipedia.org/wiki/Self-directed_IRA) Unlike conventional IRAs (which typically limit you to stocks, bonds, and mutual funds), SDIRAs put you in the driver’s seat of your [retirement strategy](https://blog.preferredtrustcompany.com/blog/retirement-investing-strategy-guide). ## **Can a Self Directed IRA Loan Money?** Yes. Your SDIRA can lend money to third parties — but only if it’s [structured properly](https://blog.preferredtrustcompany.com/blog/fund-structure) and remains compliant with IRS rules. [Accuplan](https://www.accuplan.net/blog/private-lending-self-directed-ira/?utm_source=chatgpt.com) Here’s how it works: - The IRA, not you personally, is the lender. - Loan terms must be documented clearly (interest rate, repayment schedule, collateral, if any). - All funds must flow into and out of the IRA — not your personal bank account. - Borrowers cannot be [disqualified persons](https://blog.preferredtrustcompany.com/blog/disqualified-persons) (more on this below). This structure essentially allows your IRA to act like a private lender, earning interest [tax-deferred](https://blog.preferredtrustcompany.com/blog/tax-deferred-meaning-explained) (Traditional) or potentially tax-free ([Roth](https://blog.preferredtrustcompany.com/blog/how-many-roth-iras-can-i-have)). ## **What Is a Self Directed IRA Loan?** A Self Directed IRA loan is simply a loan issued by your IRA to an external borrower. Unlike a personal loan, the transaction must happen entirely within the IRA, and the funds stay sheltered under the retirement account’s tax rules. You choose: - The loan amount - The interest rate - The duration - Whether the loan is secured by collateral This allows you to generate predictable interest income inside the tax-advantaged plan, much like a bank, but with more control. ## **Who You Cannot Lend To… Disqualified Persons** ![disqualified persons](https://blog.preferredtrustcompany.com/hs-fs/hubfs/disqualified%20persons.jpg?width=454&height=454&name=disqualified%20persons.jpg)IRS rules strictly prohibit your SDIRA from doing lending transactions with certain relatives or related entities. These “disqualified persons” include: - You (the IRA owner) - Your spouse - Your parents or grandparents - Your children or grandchildren - Spouses of children - Any entity you or these relative’s control - …and many more. If your SDIRA lends to or benefits any disqualified person, it’s considered a prohibited transaction, which can trigger the loss of tax advantages and immediate distribution of the account. [Accuplan](https://www.accuplan.net/self-directed-ira/rules/?utm_source=chatgpt.com) ## **Can You Borrow Inside a Self Directed IRA?** You cannot borrow personally from your IRA, and there is no way to take a personal loan from your retirement account. However, your IRA itself can borrow money to help purchase an asset, but only through a [non-recourse loan](https://blog.preferredtrustcompany.com/blog/non-recourse-loans). ## **What Is a Non-Recourse Loan?** A non-recourse loan is a loan where the lender’s only claim, in the event of default, is on the investment itself, not your personal assets. For example: if your SDIRA buys a property using leverage, the bank’s recourse in case of default is limited to the property, not your personal bank accounts. Non-recourse lending is the only allowed financing method for SDIRA purchases because it keeps the investment fully within the retirement account’s legal boundaries. ## Real Estate, Loans, and Tax Rules (UBIT) If your SDIRA uses debt to finance a property purchase or investment, a portion of the income may be subject to [UBIT — unrelated business income tax](https://blog.preferredtrustcompany.com/blog/what-is-ubit-tax). [Accuplan](https://www.accuplan.net/self-directed-ira/rules/?utm_source=chatgpt.com) Here’s how it works: - UBIT may apply when an IRA owns an operating business or earns income from debt-financed property. - The taxable portion is usually tied to how much of the investment was financed with debt. Understanding UBIT helps you plan your investments wisely — because while your SDIRA income is usually tax-advantaged, UBIT can create a tax obligation if leveraged debt is involved. ## **A Step-by-Step View of IRA Lending (Loan Investing)** **![Step by Step IRA Lending inforgraphic 12.22.25](https://blog.preferredtrustcompany.com/hs-fs/hubfs/Step%20by%20Step%20IRA%20Lending%20inforgraphic%2012.22.25.png?width=836&height=470&name=Step%20by%20Step%20IRA%20Lending%20inforgraphic%2012.22.25.png)** 1. **Establish Your SDIRA** Open and fund your account through contributions, [transfers](https://blog.preferredtrustcompany.com/blog/blog/move-qualified-funds-to-maximize-retirement-strategy), or [rollovers](https://blog.preferredtrustcompany.com/blog/blog/dont-leave-your-401k-savings-behind). 1. **Define Your Loan Terms** Decide on the terms (interest rate, schedule, collateral) and ensure they’re documented. 1. **Execute the Loan** Instruct your [custodian](https://blog.preferredtrustcompany.com/blog/self-directed-ira-custodian-understanding-the-role-of-a-custodian-in-protecting-your-self-directed-ira-investments) to issue the loan on behalf of your SDIRA. 1. **Collect Payments** Payments must go directly into your SDIRA and never to you personally. 1. **Manage Compliance** Keep detailed records and stay aware of prohibited persons and UBIT implications. ## **Why Loans Are a Powerful SDIRA Strategy** Investing through loans, whether real estate notes or private lending, can deliver predictable, income-driven returns inside a [self directed retirement account](https://blog.preferredtrustcompany.com/blog/benefits-of-a-self-directed-ira). Because the IRA earns the interest, every dollar earned grows tax-advantaged, bringing potential [retirement growth](https://blog.preferredtrustcompany.com/blog/investing-and-retirement-strategies). Remember loan investments: - Can be backed by collateral - Allow you to set your own terms - [Diversify](https://blog.preferredtrustcompany.com/blog/diversification-in-investing) your retirement beyond public markets ## **Avoiding Costly Mistakes by Staying Compliant!** Staying compliant is crucial. Watch for pitfalls like: - Lending to a disqualified person - Personal guarantees on IRA debt - Commingling personal and IRA funds If these occur, the IRS may treat the IRA as distributed, triggering penalties and [taxes](https://blog.preferredtrustcompany.com/blog/blog/tax-time-faqs-2019).   ## Ready to Take Control of Your Retirement? [Self Directed IRAs](https://blog.preferredtrustcompany.com/blog/benefits-of-self-directed-ira) are powerful because you choose where your [retirement dollars](https://blog.preferredtrustcompany.com/blog/how-long-will-retirement-savings-last-stretching-your-nest-egg) work! Whether that’s real estate, private lending, precious metals, or other [alternatives,](https://blog.preferredtrustcompany.com/blog/exploring-alternative-retirement-plans-thinking-outside-the-401k) you can let your SDIRA be one of your main retirement income vehicles. But [smart investing](https://blog.preferredtrustcompany.com/blog/retirement-income-investing-secure-your-financial-future) begins with understanding the rules, especially when it comes to loans and [compliance](https://blog.preferredtrustcompany.com/blog/a-comprehensive-guide-to-due-diligence-for-alternative-investments). Want help building a compliant SDIRA strategy that fits your financial vision? Contact [Preferred Trust Company’s](https://blog.preferredtrustcompany.com/blog/preferredtrustcompany.com) SDIRA experts today to [explore](https://www.preferredtrustcompany.com/schedule-a-consultation/) how your retirement could benefit from alternative investing.     ###### Subscribe For Updates Share: [facebook-f icon](http://www.facebook.com/share.php?u=https://blog.preferredtrustcompany.com/blog/self-directed-ira-loan-rules) [linkedin-in icon](http://www.linkedin.com/shareArticle?mini=true&url=https://blog.preferredtrustcompany.com/blog/self-directed-ira-loan-rules) [twitter icon](https://twitter.com/intent/tweet?url=https://blog.preferredtrustcompany.com/blog/self-directed-ira-loan-rules) [pinterest-p icon](http://pinterest.com/pin/create/link/?url=https://blog.preferredtrustcompany.com/blog/self-directed-ira-loan-rules) [envelope icon](mailto:?body=https://blog.preferredtrustcompany.com/blog/self-directed-ira-loan-rules) ## Related posts [![](https://blog.preferredtrustcompany.com/hubfs/NonRecourse72.jpg)](https://blog.preferredtrustcompany.com/blog/non-recourse-loans) ### [Non-Recourse Loans and Self-Directed IRAs: Maximizing Investment Opportunities](https://blog.preferredtrustcompany.com/blog/non-recourse-loans) [![](https://blog.preferredtrustcompany.com/hubfs/MaxWealth.jpg)](https://blog.preferredtrustcompany.com/blog/benefits-of-self-directed-ira) ### [Maximizing Wealth: Exploring the Benefits of a Self-Directed IRA](https://blog.preferredtrustcompany.com/blog/benefits-of-self-directed-ira) [![Business owner looking out window with an open sign in the window](https://blog.preferredtrustcompany.com/hubfs/PTC%20Blog%20SD%20Roth%20IRA%2010.24.25%201200x628.png)](https://blog.preferredtrustcompany.com/blog/self-directed-roth-ira-answers) [Blog](https://blog.preferredtrustcompany.com/blog/tag/blog) ### [Self-Directed Roth IRA: Answers That Could Transform Your Retirement](https://blog.preferredtrustcompany.com/blog/self-directed-roth-ira-answers) ![White Horizontal Logo PNG cropped-1](https://blog.preferredtrustcompany.com/hs-fs/hubfs/White%20Horizontal%20Logo%20PNG%20cropped-1.png?width=250&height=67&name=White%20Horizontal%20Logo%20PNG%20cropped-1.png "White Horizontal Logo PNG cropped-1")  Specialist self-directed IRA custodian for alternative investment sponsors and individual investors.  [702-998-7892](tel:702-998-7892) [linkedin-in icon](https://www.linkedin.com/company/preferredtrust) [youtube icon](https://www.youtube.com/@preferredtrust) ##### For Investors - [Open an Account](https://preferredtrustcompany.com/self-directed-ira-applications/) - [Fee Schedule](https://preferredtrustcompany.com/fee-schedule/) - [Investor FAQs](https://www.preferredtrustcompany.com/faqs) ##### Investment Options - [Precious Metals](https://www.preferredtrustcompany.com/precious-metals-2/) - [Digital Assets](https://www.preferredtrustcompany.com/digital-currency/) ##### Client Tools - [Client Portal](https://icp.infovisa.com/0234) - [Forms Library](https://www.preferredtrustcompany.com/forms/) - [Contact Support](https://www.preferredtrustcompany.com/contact-us/) - [Blog](https://info.preferredtrustcompany.com/blog) - [IRA Rules](https://www.preferredtrustcompany.com/inherited_iras/) ##### Company - [About](https://www.preferredtrustcompany.com/about-ira-custodian/) - [Contact Us](https://www.preferredtrustcompany.com/contact-us/) --- Preferred Trust Company performs the duties of a directed (passive) custodian and does not provide due diligence to third parties regarding prospective investments, platforms, sponsors, dealers, or service providers. 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