How do you invest in private credit? Individual investors usually reach it through one of four routes: non-traded business development companies (BDCs) and evergreen funds, interval or tender-offer funds, private funds offered under Regulation D, or direct purchases of individual loans and notes. A self-directed IRA can sit on top of some of these. Each route has different access rules, minimums, and liquidity terms, and 2026 has shown why the liquidity terms matter most. This guide explains what private credit is, how large it really is, how each route works, where residential mortgage notes fit, and ten questions to ask before you commit capital. It is for investors, and the advisors who work with them, who want to understand private credit before committing capital. Some routes are open to everyday investors, while others are limited to accredited investors.
Key Takeaways
- Private credit is lending that happens outside public bond and loan markets. The Federal Reserve defines it narrowly as direct loans to mid-market businesses by non-bank vehicles; industry usage is broader and includes asset-based finance such as residential loans.1
- Size estimates depend on the definition: roughly $1.3 trillion in the U.S. per the Fed and the New York Fed, and more than $2 trillion globally in 2026 per Moody’s, which expects the market to approach $4 trillion by 2030.2, 3
- Individuals typically reach private credit through four routes: non-traded BDCs and evergreen funds, interval or tender-offer funds, private Regulation D funds, or direct loan and note purchases. Access rules, minimums, and liquidity differ widely.
- The 2026 lesson is about liquidity: in the first quarter, withdrawal requests at several large semi-liquid private credit funds ran from roughly 8% to more than 40% of shares, against a typical 5% quarterly cap.4
- Residential mortgage notes are secured by homes, so the main risks are borrower default, collateral value, servicing, and state-specific foreclosure timelines, which averaged 563 days nationally in Q2 2026.7
- Before investing, ask what the fund owns, whether it uses leverage, exactly how and when you can get your money out, who services the loans, and how the manager reports to investors.
What Is Private Credit?
Private credit is lending that takes place outside the public bond and loan markets. A bank is usually not the lender, and there is no ticker to trade. The New York Fed describes it as “a loan that is negotiated directly between a borrower and a small group of nonbank lenders.”2 The Federal Reserve Board’s definition is similar: “direct loans made to mid-market businesses typically by non-bank vehicles.”1
Two terms help sort the landscape:
- Direct lending (originated credit): the fund writes new loans, usually to companies.
- Acquired credit: the fund buys existing loans, often at a discount to the balance owed. Residential mortgage note funds generally fall here.
How Big Is Private Credit?
You will see very different numbers depending on who is counting and what they include. That is a definition issue, not an error.
| Source | Estimate | What it covers |
|---|---|---|
| Federal Reserve Board (FEDS Notes, May 2025) | $1.34 trillion U.S.; nearly $2 trillion global (2024 data) | Narrower definition: direct loans to mid-market companies by non-bank vehicles1 |
| New York Fed (October 2025) | “Approaching $1.3 trillion” in the U.S. | About $800 billion in private credit funds and about $500 billion in BDCs2 |
| Moody’s (2026 Outlook) | Global assets under management “exceeding $2 trillion in 2026 and approaching $4 trillion by 2030” | Global; expects growth to tilt toward asset-based finance3 |
Broader industry tallies that include all private debt come out higher still. The direction is consistent: the Fed calls private credit “one of the fastest-growing segments of nonbank financial intermediaries over the past 15 years or so,” and says it “has grown roughly five times since 2009.”1
Why Investors Are Looking at Private Credit
- Income from contractual payments. Most private credit strategies aim to produce income from borrower interest and principal payments rather than relying on price appreciation.
- Floating-rate exposure. The New York Fed notes that the shift toward floating-rate loans means policy-rate changes reach borrowing costs more quickly.2 For a lender that can lift income when rates rise, but it also puts more strain on borrowers.
- A different return driver. Returns depend on borrower payments and collateral rather than on equity-market valuations, so private credit can behave differently from stocks and bonds. That does not make it low-risk.
- Collateral in asset-backed segments. Loans secured by real assets, including residential real estate, give lenders a recovery path if a borrower stops paying.
The same regulators that describe this growth also flag the risks. The New York Fed points to rapid capital inflows that could “loosen loan underwriting standards,” limited transparency, and the fact that “nonbank private credit lenders do not have access to central bank liquidity facilities” in a severe downturn.2 Moody’s headline for 2026 puts it plainly: “Growth to accelerate, along with complexity and liquidity risks.”3
How to Invest in Private Credit: Four Routes, Plus the IRA Option
1. Non-traded BDCs and evergreen private credit funds
Business development companies lend to mid-sized companies and pass income to shareholders. The New York Fed notes that BDC shareholders are “most of whom are retail and high-net-worth individual investors.”2 Non-traded versions are typically offered through financial advisors and let you subscribe at a stated net asset value.
2. Interval and tender-offer funds
These are registered funds that hold private loans but repurchase a portion of shares at set intervals rather than daily. Many are open to investors who are not accredited, subject to the fund’s own suitability standards.
3. Private funds under Regulation D
Pooled funds offered privately under Rule 506(b) or 506(c). Purchasers are generally limited to accredited investors. Rule 506(c) allows general solicitation, but the issuer has “an affirmative obligation to take ‘reasonable steps’ to verify” that every investor is accredited, and a simple self-certification questionnaire generally will not suffice.9 Liquidity and commitment terms are set out in the offering documents.
4. Buying loans or notes directly
Active investors can buy individual loans or mortgage notes. You choose each asset, but you also take on sourcing, due diligence, servicing, and legal work. See where to find mortgage notes and how passive note investing really is.
A note on public options: listed BDCs and ETFs
Publicly traded business development companies and exchange-traded funds with private credit exposure trade on stock exchanges, so anyone with a brokerage account can buy them, often with no accreditation requirement. They offer daily liquidity, but they are not the same as owning private loans directly: share prices move with the market and can diverge from the value of the underlying loans.
The IRA option: self-directed accounts
Some of these investments can be held in a self-directed IRA if the custodian accepts them. The custodian administers the account; the fund or investor holds and manages the underlying assets. Fees, custodian rules, and tax treatment vary. See investing in mortgage notes with a self-directed IRA.
| Route | Who can usually invest | Typical liquidity | Scrutinize first |
|---|---|---|---|
| Non-traded BDC / evergreen fund | Accredited or suitability-screened retail; varies by offering | Periodic repurchases, commonly capped (5% quarterly was the standard cap in Q1 2026 reports) | Withdrawal terms, leverage, valuation |
| Interval / tender-offer fund | Often open to non-accredited investors; varies | Repurchases at set intervals; terms differ by structure | Repurchase policy, leverage, fees |
| Regulation D private fund | Accredited investors only; verified under 506(c) | Defined in offering documents; often a commitment period | Manager, leverage, servicing, legal documents |
| Direct loan or note purchase | Anyone with capital and expertise | Resale possible, but the secondary market varies | Due diligence, servicing, state law |
What the 2026 Withdrawal Headlines Teach
In the first quarter of 2026, requests to sell shares at several of the largest non-traded private credit funds ran from about 8% to more than 40% of shares outstanding. Most funds honored about 5%, the standard quarterly cap, so redeeming investors received roughly 43% to 46% of what they asked for in several reported examples.4
The pattern had not fully cleared months later. A September 2026 report on one large fund said third-quarter requests were about 10% of shares against a 5% cap, and that investors who sought liquidity in the second and third quarters “will have received an estimated 75% of their requested capital within approximately 90 days.”5
What to take from it:
- It is a structure lesson. A withdrawal queue shows that a fund promised more liquidity than its portfolio could deliver on demand. That is a statement about the structure, not necessarily about loan quality, although the two can feed each other.
- Read the gate before you subscribe. Ask what happens if requests exceed the cap, whether the cap is a limit or a promise, and how long unfilled requests wait.
- Match the lock-up to your time horizon. A fund with a defined commitment period tells you up front what you cannot do. That is easier to plan around than a quarterly queue.
- Assume no backstop. Private credit lenders cannot draw on central bank liquidity in a crisis.2
Where Residential Mortgage Notes Fit
Residential mortgage notes sit in the residential real estate segment of private credit. The borrowers are homeowners rather than companies, and the collateral is the home itself. A fund that buys existing notes at a discount to the value of the property is practicing acquired credit; the discount, expressed as investment-to-value (ITV), is the equity cushion between what the fund pays and what the property is worth. For background, see what a mortgage note is and what a mortgage note fund is.
| Factor | Corporate direct lending | Residential mortgage notes |
|---|---|---|
| Typical borrower | Mid-market companies | Individual homeowners |
| Collateral | Business assets and enterprise value | Residential real property with an appraisable value |
| Resolution if payments stop | Restructuring or enforcement against the company | Modification, repayment plan, or foreclosure, governed by state law |
| Main risk drivers | Company earnings, covenants, leverage, credit cycle | Borrower default, home values, servicing quality, foreclosure timelines |
Two current data points give a baseline for the residential side. These describe the broader U.S. market, not any specific fund’s portfolio:
- Delinquencies. The Mortgage Bankers Association reported a seasonally adjusted delinquency rate of 4.37% for Q2 2026, with 1.43% of loans 90 or more days delinquent and 0.67% in the foreclosure process.6
- Foreclosure timelines. ATTOM reported that “properties foreclosed in Q2 2026 had been in the foreclosure process for an average of 563 days,” the quickest since 2013. The state matters enormously: Louisiana averaged 3,491 days and New York 2,007.7
Timelines like these are why servicing and state-level legal knowledge matter for note investors. For how non-performing notes are resolved in practice, see how to profit by buying non-performing notes and this real-world case study.
How the Integrity Income Fund Fits
The following details are specific to the Integrity Income Fund. They are not statements about mortgage note funds in general. Not all note funds pay monthly, and not all target 8–10%.
- Operated by Labrador Lending, a veteran-owned residential mortgage note investing firm. Jamie Bateman is the founder and fund manager.
- Acquires primarily first-lien residential mortgage notes on the secondary market, both performing and non-performing.
- Targeted preferred return of 8% annually on investments of $25,000–$99,000 and 10% on $100,000 and above. Targeted, not guaranteed.
- Targeted monthly distributions and monthly investor updates.
- $25,000 minimum investment and a 12-month commitment period.
- No fund-level leverage.
- Asset management is handled in-house; loan servicing is handled by licensed third-party servicers.
- Zero missed distributions since the fund launched in June 2022, and K-1s delivered on schedule each year to date. These are historical results, not a guarantee of future performance.
- Eligible for self-directed IRAs: the custodian administers the account, and the fund holds and manages the underlying notes.
- Offered under Rule 506(c) to verified accredited investors only.
Returns on notes bought at a discount come from a mix of borrower payments, payoffs, loan modifications, and collateral recovery, and the fund’s targets depend on those outcomes. After the 12-month commitment period, redemption requests have historically been fulfilled in approximately three weeks. That is a historical observation, not a guarantee, and the fund remains a private, illiquid investment. To compare it with other structures, see how to evaluate a mortgage note fund.
Ten Questions to Ask Before You Invest
- What exactly does the fund own? Asset type, lien position, geography, and the mix of performing and non-performing loans.
- Does it use leverage? If so, how much, from whom, and what happens if the lender calls the loan?
- How and when can I get my money out? Get the terms in writing, including what happens when requests exceed capacity.
- Who services the loans? Is the servicer licensed and independent of the people making investment decisions?
- How are assets valued and how often am I told? Look for a clear valuation method and regular reporting.
- What are the fees, and what is targeted versus contractual? Ask for the full fee schedule and for exactly how any preferred return is defined.
- What is the manager’s verifiable track record? Distribution history, years in the asset class, and references you can contact.
- How concentrated is the portfolio? Number of loans, largest positions, and geographic spread.
- What tax documents will I receive, and when? Ask whether the fund issues K-1s or 1099s, and whether it is eligible for an IRA.
- What do the legal documents say? Read the private placement memorandum, subscription agreement, and operating agreement, and confirm how accredited status is verified.
Glossary
- Private credit
- Debt originated or acquired outside public capital markets and held by private investors or funds rather than banks or public bond markets.
- Direct lending
- A private credit strategy in which the fund originates new loans, typically to mid-sized companies.
- Acquired credit
- A strategy in which the fund buys existing loans, often at a discount to the balance owed.
- Asset-based finance (ABF)
- Lending secured by pools of assets such as consumer receivables, equipment, or residential real estate.
- Business development company (BDC)
- A company that invests in or lends to mid-sized businesses and distributes income to shareholders.
- Evergreen fund
- An open-ended fund that continuously accepts new capital and offers periodic, often capped, repurchases.
- Investment-to-value (ITV)
- The price paid for a note relative to the value of the property securing it. A lower ITV means a larger equity cushion.
- Preferred return
- The annual return investors are targeted to receive before the manager participates in profits. See what a preferred return is.
- Accredited investor
- An individual with more than $200,000 in annual income ($300,000 jointly) in each of the last two years, or a net worth above $1 million excluding the primary residence, or who holds a Series 7, 65, or 82 license in good standing.8
Frequently Asked Questions
What is private credit in simple terms?
Private credit is lending that happens outside public bond and loan markets. Instead of buying a traded bond, an investor puts money into a fund or vehicle that makes or buys loans negotiated directly with borrowers. The Federal Reserve defines it as direct loans to mid-market businesses by non-bank vehicles, while industry usage also includes asset-backed lending such as residential mortgage notes.1
How do I invest in private credit as an individual?
The main routes are non-traded BDCs and evergreen funds, interval or tender-offer funds, private funds offered under Regulation D, and direct purchases of individual loans or notes. A self-directed IRA can hold some of these. Access rules, minimums, and liquidity terms differ by route, so compare the repurchase or redemption terms before you subscribe.
Do I need to be an accredited investor to invest in private credit?
It depends on the route. Private funds under Regulation D are generally limited to accredited investors, and funds that advertise under Rule 506(c) must take reasonable steps to verify each investor’s status. Some registered products, such as certain interval funds and non-traded BDCs, are open to non-accredited investors subject to suitability standards. An individual generally qualifies with more than $200,000 in income ($300,000 jointly) or a net worth above $1 million excluding the primary residence.8, 9
What returns can I expect from private credit?
Returns vary widely by strategy, manager, leverage, fees, and market conditions, and they are never guaranteed. Corporate direct lending is typically floating-rate and moves with base rates, while residential note funds depend on purchase discounts and how each loan is resolved. For reference, the Integrity Income Fund targets an 8% preferred return on investments of $25,000–$99,000 and 10% on $100,000 and above, not guaranteed. Not all note funds pay monthly or target 8–10%.
Is private credit risky?
Yes. Key risks include borrower default, valuation opacity, leverage, manager quality, and liquidity. The New York Fed has noted that private credit lenders lack access to central bank liquidity facilities and that rapid inflows could loosen underwriting standards.2 Collateral, conservative purchase prices, diversification, and the absence of fund-level leverage can reduce certain risks, but none eliminates them.
Is a mortgage note fund considered private credit?
Yes, in the broader industry sense. A fund that buys residential mortgage notes outside public markets is investing in acquired, asset-backed private credit. The Fed’s narrower definition focuses on corporate direct lending, so you may see mortgage note funds described as part of the residential real estate segment of private credit. See our guide to mortgage note funds.
Can I invest in private credit with an IRA?
Often yes, through a self-directed IRA, provided the custodian accepts the investment. The custodian administers the account while the fund or investor holds and manages the underlying assets. Fees, custodian policies, and tax treatment vary, so confirm eligibility with the fund and a tax advisor. See investing in mortgage notes with a self-directed IRA.
What happened with private credit withdrawals in 2026?
In the first quarter of 2026, requests to sell shares at several large non-traded private credit funds ran from roughly 8% to more than 40% of shares, while funds generally honored about 5%, the standard quarterly cap.4 A September 2026 report on one large fund said third-quarter requests were again about 10% of shares against a 5% cap.5 The episode highlights the importance of understanding a fund’s redemption terms before investing.
What is the minimum investment for private credit?
It depends on the route. Shares of publicly traded BDCs can be bought for the price of a single share, while non-traded funds and private Regulation D funds set their own minimums, which vary widely by offering. For reference, the Integrity Income Fund has a $25,000 minimum investment and is open to verified accredited investors only. Check each offering’s documents for its exact terms.
Explore the Integrity Income Fund
A private fund investing primarily in first-lien residential mortgage notes, with targeted monthly distributions, no fund-level leverage, and a 12-month commitment period. Open to verified accredited investors only. Returns are targeted, not guaranteed.
- Federal Reserve Board, FEDS Notes, “Bank Lending to Private Credit: Size, Characteristics, and Financial Stability Implications,” May 23, 2025. federalreserve.gov
- Federal Reserve Bank of New York, “NBFIs in Focus: The Basics of Private Credit,” October 17, 2025. tellerwindow.newyorkfed.org
- Moody’s, 2026 Private Credit Outlook (executive summary). moodys.com
- Advisor.ca, “Private credit recap: Asset managers respond to elevated redemption requests,” April 14, 2026. advisor.ca
- InvestmentNews, report on a large non-traded private credit fund’s third-quarter 2026 repurchase results, September 8, 2026. investmentnews.com
- Mortgage Bankers Association, National Delinquency Survey, Q2 2026 (released August 13, 2026), as reported by HousingWire and Safeguard Properties.
- ATTOM, Mid-Year 2026 U.S. Foreclosure Market Report, July 16, 2026. attomdata.com; corroborated by RISMedia.
- U.S. Securities and Exchange Commission, accredited investor definition: sec.gov; thresholds also summarized by Nasdaq.
- Barnes & Thornburg, “General Solicitation of Investors for Your Financing: Rule 506(c) of Regulation D.” bipc.com