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What is a Borrower Payment Dependent Note (BPDN)?

Eric Rhodes
February 24, 2025

hard money loan, Investors, Private lender, ROI

Borrower Payment Dependent Notes (BPDNs) are a type of investment security where investor returns are directly tied to the payments made by a specific borrower on an underlying loan. These notes are commonly used in private lending and alternative investment platforms, offering investors a way to participate in real estate-backed loans with structured repayment terms.

How BPDNs Work

Investors purchase a BPDN, which represents an interest in a specific loan or pool of loans.
The investor’s returns depend on the borrower’s ability to make scheduled payments, including principal and interest.
If the borrower defaults, investors may experience reduced or no returns, depending on loan performance and collateral recovery.

Key Features of BPDNs

Payment Contingency – Investors only receive payments if the borrower repays the loan.
Real Estate-Backed – Often collateralized by real estate, reducing risk exposure.
Higher Yield Potential – Can offer attractive returns compared to traditional fixed-income investments.
Risk Factors – Dependent on borrower creditworthiness, property value, and market conditions.
Liquidity Considerations – Typically, BPDNs are not easily tradable, requiring investors to commit until loan maturity.

BPDNs in Real Estate Lending

Private lenders like Yieldi use BPDNs to offer investors opportunities to fund real estate-backed loans. These structured investments provide passive income opportunities while diversifying risk through secured loan portfolios. Yieldi has never missed an interest payment to investors, ensuring reliability and trust in its lending platform.

Are BPDNs a Good Investment?

Pros: Attractive yields, real estate-backed security, passive income potential.
Cons: Payment dependency, potential borrower defaults, limited liquidity.

Investors considering BPDNs should evaluate risk factors, borrower credit strength, and the real estate collateral securing the loan before investing. Yieldi’s track record of never missing an interest payment provides additional confidence for investors looking for dependable passive income opportunities.

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