Is Private Lending Safe? Secured vs Unsecured Notes in Ontario
"Is private lending safe?" is exactly the question a careful investor should ask — and the honest answer isn't a simple yes. No investment is free of risk, and anyone who tells you otherwise is selling, not informing. What you can do is understand where the risk lives and decide whether you're comfortable with it. Here's a straight look at the real risks of private lending, the all-important difference between a secured and an unsecured note, and how to do your own due diligence.
First, a reality check on "safe"
Every investment trades risk for return. A fixed 8% return exists because there is risk — if it were truly risk-free, it would pay a risk-free rate, like a GIC or a government bond. So "safe" and "guaranteed" are words to be skeptical of whenever they're attached to a return that's meaningfully higher than those. The more useful question isn't "is it safe?" but: what are the risks, how likely are they, and could I live with the worst case?
Secured vs unsecured: the distinction that matters most
This is the single most important thing to understand before you lend a dollar.
- An unsecured note is backed by the borrower's written promise to repay — the promissory note — together with their track record and ability to pay. If the borrower can't repay, you're an unsecured creditor: you have a legal claim, but no specific asset you can automatically seize.
- A secured note adds a registered legal interest (such as a mortgage or charge) against a specific property. If the borrower defaults, you have recourse to that asset. That can improve your odds of recovery — though it's still not a guarantee, since property values, selling costs, and the priority of other claims all affect what you'd actually recover.
With SIP, the promissory note is unsecured by default. An investor who wants a registered security interest against the property can arrange one at their own legal cost. Neither choice is "right" for everyone — but knowing which one you hold, and deciding deliberately, is what separates an informed lender from a hopeful one.
The real risks to weigh
- Borrower & project risk. Repayment depends on the borrower completing projects and staying solvent. With an unsecured note, that's what you're relying on.
- Real estate & market risk. Property values can fall, renovations can run over budget, and a sale or refinance can take longer than planned.
- Liquidity risk. Your capital is committed for the term. Unlike a publicly traded stock, you generally can't pull it out early if your circumstances change.
- Concentration risk. Putting too much of your capital into one borrower or one deal magnifies every other risk on this list.
- Regulatory considerations. Promissory notes can be regulated as securities in Ontario, so how they're offered matters — another reason to get independent advice.
How to do your due diligence
"Safer" lending is mostly about the homework you do before committing. A practical checklist:
- Read the note. Understand the amount, interest rate, term, payment schedule, and whether it is secured or unsecured.
- Decide on security. If it's unsecured by default, decide whether you want to register a charge against the property (at your own cost).
- Vet the borrower. Look at their track record, experience, and completed projects — not just the pitch.
- Get independent advice. A lawyer and/or financial advisor who represents you, not the borrower.
- Diversify and size sensibly. Don't over-concentrate, and only commit capital you can genuinely afford to put at risk.
- Understand the exit. Know exactly when and how your principal comes back.
How SIP approaches it, honestly
We think the right way to talk about risk is plainly. SIP's private lending pays a fixed 8% via a promissory note, unsecured by default with the option to register security at your cost. SIP also invests its own capital alongside its lending partners, so our interests are aligned, and our construction background means projects are underwritten with realistic budgets — which reduces, but never eliminates, project risk. None of that makes private lending risk-free; it makes it a calculated risk you should evaluate for yourself. You can read exactly how private lending works, see how the 8% structure is set up, and review completed Niagara projects in our portfolio.
The safest investor isn't the one who's been told there's no risk — it's the one who understands the risk and goes in with eyes open. If you'd like to talk through whether private lending fits your situation, get in touch; we're happy to walk through it honestly, no pressure.
This article is general information only, not financial, legal, or investment advice, and is not an offer or solicitation to buy any security. All investing carries risk, including the risk of loss of principal; a fixed interest rate is not a guarantee of repayment, and an unsecured loan is not secured against any property by default. Promissory notes may be regulated as securities. Do your own due diligence and consult qualified legal and financial professionals before making any investment decision.