Key takeaways
- Private lenders fund loans outside the traditional banks, often with faster decisions and more flexible criteria.
- That flexibility usually costs more, and loans are typically short-term and secured against an asset.
- A clear exit plan, written terms and independent advice are essential before you sign.
What is private lending?
Private lending is finance from non-bank sources such as private investors, funds and specialist lenders. Many private loans are secured against property or another asset, and they are often used when speed or flexibility matters more than the lowest possible rate.
Private lender vs bank
| Bank | Private lender | |
|---|---|---|
| Speed | Can take weeks | Often faster, depending on the deal |
| Cost | Generally lower rates and fees | Generally higher rates and fees |
| Flexibility | Stricter policy rules | More case-by-case assessment |
| Focus | Serviceability and credit history | Security value and a clear exit strategy |
| Term | Often long-term | Often short-term, such as months to a couple of years |
When private lending can make sense
- Time-sensitive purchases where a bank cannot settle in time.
- Development and renovation projects that need short-term funding.
- Bridging between a purchase and a sale or refinance.
- Complex or non-standard situations that fall outside bank policy.
The costs and risks to understand
- Higher interest rates and fees, such as establishment, valuation and legal costs.
- Short terms, so you need a realistic plan to repay or refinance.
- If you cannot repay, the lender can usually sell the security, so you could lose the asset.
- Private loans for business or investment purposes are generally not covered by the same consumer credit rules as home loans, so independent legal and financial advice matters even more.
Questions to ask before you sign
- What is the total cost, including all fees, over the full term?
- What is my exit strategy, and what if it takes longer than planned?
- What happens if I miss a payment or the loan term ends?
- Are there early repayment or extension fees?
- Have I had the contract reviewed by a solicitor?
Read more on our private and development finance page, or download our free private funding guide.
Private funding near you
We help investors, builders and owners across Melbourne, Brisbane and the Gold Coast. See our local pages for Truganina, Footscray, North Lakes, Burleigh Heads and Surfers Paradise, or our main Melbourne and Brisbane pages.
Frequently asked questions
Is private lending only for people the banks have declined?
No. Some borrowers choose it for speed or flexibility, even when they could qualify elsewhere. It is usually more expensive, so it should suit a specific purpose.
How fast can a private loan be arranged?
It depends on the lender, the security and how quickly valuations and documents are ready. Many private loans move faster than bank loans, but approval is not guaranteed.
Do I need a clear exit strategy?
Yes. Most private loans are short-term, so lenders want to know how you will repay, whether through a sale, a refinance or other funds.
Ready to talk it through?
Use our private funding page for an estimate, or call 1300 483 955 for a free, no-obligation chat. We compare a panel of 30+ lenders and handle the paperwork.
This article is general information only and does not take into account your objectives, financial situation or needs. It is not an offer of credit. Finance is subject to lender assessment and approval. Tax treatment varies, so speak to your accountant.