If you have been turned away by the big banks or simply want to avoid borrowing money from a traditional financial institution, private lending could be the ideal alternative. Avoid the time-consuming process of traditional lending and embrace the flexibility and speed of choosing a private lender. Here’s what you need to know.
What is private lending?
Private lending in simply the practice of borrowing money from a non-traditional lender without having to involve the big banks in Australia. Coming in all shapes and sizes, private lenders can be individuals, companies or investment firms. Their speed and flexibility is a big drawcard for many borrowers, however they typically offer loans at a higher interest rate and with less-favourable terms compared to traditional banks and financial institutions. This is because there is, inevitably, a higher risk involved with them lending you money.
Many borrowers choose to go down the private lending path because they have been unable to obtain financing from traditional sources, whether due to a poor credit history, a lack of business experience, or various other reasons.
How does private lending work?
Borrowing from a private lender in Australia is a fairly straightforward process and similar to going with a traditional lender:
- Contact the lender: Start by reaching out to your preferred lender and provide them with your loan enquiry and requested details.
- Agree on loan terms: The lender will provide their specific loan terms, including the amount, interest rate, repayment period and any collateral requirements. They will also provide a letter of offer (LOO).
- Sign loan agreement: Once the terms and LOO are agreed to, both parties sign the necessary documents.
- Funds are disbursed: Your private lender will disburse the loan to your chosen account. Settlement usually occurs within 1–3 days.
- Make repayments: You make regular repayments to the private lender.
- Pay off loan: Once all the repayments are made, the loan is considered paid in full.
Be aware that private lending is not covered by the same consumer protections as bank loans, so it’s essential that you carefully consider the terms and conditions of the loan before agreeing to them.
Pros and cons of private lending
There are both advantages of disadvantages of private lending, so carefully consider your situation and your risk appetite before jumping into any loan agreement.
Pros
- Faster and more flexible: A speedier and hassle-free option for borrowers who need access to funds quickly, as private lenders typically have a more streamlined process for approving and disbursing their loans.
- Access for those with poor credit history: Private lending can provide funding to borrowers who may not be able to obtain financing from traditional sources due to a poor credit history or other reasons.
Cons
- Higher interest rates and fees: Private lending typically comes with higher interest rates and fees compared to traditional bank loans, which can make it more expensive for you.
- Fewer consumer protections: Private lending is not covered by the same consumer protections as bank loans, so you may have limited options if you experience financial difficulties or other problems with the loan.
Investigate the value of private lending today
Private lending is a wonderful alternative for individuals and companies that want to avoid the overwhelming amount of paperwork and bureaucracy that is often saddled with traditional lending institutions. Instead, you get a much more personal lending experience with fewer hoops to jump through.
“There are serious considerations when you are looking to borrow money – no matter the institutions. But we’ve found that our clients appreciate the personal nature of private lending, especially its speed and flexibility,” says Gary Rawlings, Managing Director at Ezi Private Lending. “Because the financial sphere can be challenging to navigate, it’s important to get support from experts like Ezi Private Lending, who can walk you through the process and ensure your specific lending needs are catered to.”
Are you looking to fund an exciting new business or invest in property but don’t have faith in the traditional banks? Private lending gives you quick and hassle-free access to the money you need. An expert broker can match you with the right private lender, so contact Ezi Private Lending today or call 1300 854 033 to find out how we can help.