Illinois has specific rules affecting private money lending that differ materially from neighboring states. Understanding usury limits, foreclosure mechanics, and licensing requirements is essential before deploying capital as a Chicago-area private lender.
Illinois usury caps
Illinois has tiered usury limits depending on loan size and purpose. Business-purpose loans (most investor lending) have higher caps than consumer loans. The Illinois Predatory Loan Prevention Act caps consumer-purpose APR at 36%; business-purpose loans secured by real estate generally are exempt. Most private money operates well within applicable caps.
Foreclosure in Illinois
Illinois is a judicial foreclosure state — foreclosure requires court proceedings and takes 9-18 months from default to sheriff's sale. This is slower than non-judicial states but provides clear procedural protections for both lenders and borrowers. Legal costs typically run $5,000-15,000.
Licensing requirements
Illinois does not require a specific license for private lending to LLCs or business borrowers (business-purpose loans). Lending to consumer borrowers triggers the Illinois Residential Mortgage License Act for first-lien residential mortgages. Most experienced Chicago private money operators lend only to LLC/business borrowers to remain exempt.
Documentation requirements
Promissory note (loan terms), mortgage (recorded against property), assignment of rents (recorded), title insurance lender's policy, and proper property insurance with lender named as additional insured. Most Chicago private money operators use real estate attorneys for documentation.
Illinois Private Lending Rules and Regulations FAQ
For business-purpose loans to LLC or commercial borrowers: typically no. For consumer-purpose loans (first-lien residential mortgages to individual consumers): yes — the Illinois Residential Mortgage License Act applies.
No effective cap on business-purpose loans to entities (LLCs, corporations) secured by real estate. Loans to individual consumers cap at 36% APR under the Predatory Loan Prevention Act.
9-18 months from default to sheriff's sale. Faster on contested cases; slower if borrower pursues all defenses. Total carrying cost for the lender during foreclosure typically runs 12-20% of the loan balance.
On business-purpose loans, yes — terms are negotiated. On consumer-purpose loans, federal and state restrictions apply.
Chicago does not levy a city income tax. Illinois state income tax of 4.95% applies to interest income from Illinois-based loans.
If lending through an LLC or other entity, the entity must be registered or qualified to do business in Illinois.
Educational content only. Private lending involves capital-at-risk and tax/legal complexity. Consult a licensed attorney and CPA before deploying capital.