Private Lender Loans in Australia

The majority of Australians apply for their home loan through a traditional bank or lender. However if your circumstances don’t fit the picture of a typical borrower that’s when a private lender may be an option to consider. Let’s take a look at what a private lender is and the pros and cons in applying for one.

What’s a private lender?

People generally turn to a private lender because they do not  meet product specs of mainstream lenders. This can be for a variety of reasons, including having a poor credit history. Private lender home loans aren’t issued by regular banks or traditional lenders rather the loan may come from a specialist finance company, an investment establishment or indeed individuals. The common thread across numerous private loan lenders is that they specialise in only short- term lending.

How do private lender home loans work?

There are four main types of home loans that private lenders offer:

Bridging loans: Bridging loans are short- term loans that borrowers generally take out when they want to buy a new home before selling their old property. They’re generally interest-only home loans that are repaid once you sell your old home..

Caveat loans: A caveat loan gives the lender an interest in your property, which means you’re using your property as security for a loan. A caveat loan can be a very quick way to get a loan if you ’re in critical need of finance. In addition, the loan terms can be veritably short, frequently just 2- 3 months, and you can generally anticipate a much higher interest rate compared to a standard home loan.

Bad credit loans: Bad credit loans are generally sought out by borrowers who have a poor credit history, similar as failing to pay bills on time, or defaulting on former loan repayments.

Second mortgages: A second mortgage involves taking out a home loan on a property where there’s already a mortgage in place. In general, the first mortgage has precedence according to when they were lodged.

The pros and cons of private lender loans.

A private lender loan can be an option for a variety of borrowers such as Developers or house flippers, who only need a short- term loan, and who are confident they ’ll be able to sell the property and repay the loan on time. It could also be of interest to people with a poor credit standing. There can be pitfalls, still, and it’s important to weigh up the pros and cons of a private lender loan. Then are some points to consider. The implicit benefits are faster settlements and generally involve lower paperwork compared to a traditional loan.

Is a private lender home loan right for me?

As with any loan product, it’s important to do your home work, compare your options and assess the costs and whether you can meet the repayments and other conditions of the loan. Bear in mind, too, that a home loan of any kind, including one from a private lender, is a big undertaking. You may risk losing your security if you fail to keep up with your loan repayments.