What is Private Lending? A Complete Guide for Australians

What is Private Lending?

Private lending is a form of financing where individuals or private companies provide loans directly to borrowers, bypassing traditional banks and financial institutions. In Australia, private lending has grown significantly as borrowers seek faster, more flexible funding solutions.

Unlike banks that rely on rigid lending criteria and lengthy approval processes, private lenders focus primarily on the security of the loan (usually property) and the borrower's exit strategy.

How Does Private Lending Work in Australia?

The private lending process is straightforward:

• Loan Application - The borrower submits details about their funding needs, property security, and repayment plan
• Assessment - The lender evaluates the property value, loan-to-value ratio (LVR), and exit strategy

• Offer - If approved, the lender provides terms including interest rate, fees, and loan duration
• Settlement - Legal documentation is completed and funds are released

• Repayment - The borrower repays according to the agreed schedule, typically interest-only with a balloon payment

Most private loans in Australia are secured against real estate, with LVRs typically ranging from 65% to 75%.

Who Uses Private Lending?

Private lending suits borrowers who:

• Need funds quickly (settlement in days, not weeks)
• Have been declined by banks due to credit history or income verification issues

• Require short-term bridging finance
• Are property developers needing construction or development funding

• Self-employed individuals with complex income structures
• Investors seeking to act fast on opportunities

Private Lending Interest Rates in Australia

Private lending rates are higher than bank rates, reflecting the increased risk and flexibility offered. Typical rates in 2025:

• First mortgage loans: 9% to 14% p.a.
• Second mortgage loans: 14% to 18% p.a.

• Development finance: 10% to 16% p.a.

Additional fees may include:

• Establishment fee: 1% to 3% of loan amount
• Legal fees: $1,500 to $3,000

• Valuation fees: $300 to $800

Benefits of Private Lending

Speed: Approvals in 24-48 hours, settlement within days

Flexibility: Lenders can structure deals to suit unique circumstances

Less Documentation: Focus on security value rather than extensive financial history

Short-Term Solutions: Ideal for bridging gaps or time-sensitive opportunities

Risks and Considerations

Before pursuing private lending, consider:

• Higher Costs: Interest rates and fees exceed traditional bank loans
• Shorter Terms: Most loans are 6 to 24 months

• Exit Strategy: You need a clear plan to repay or refinance
• Property at Risk: Defaulting could result in losing your security property

Is Private Lending Regulated in Australia?

Yes. Private lenders providing consumer credit must hold an Australian Credit Licence (ACL) and comply with the National Consumer Credit Protection Act 2009 (NCCP). However, many private loans are structured as business-purpose loans, which have fewer regulatory requirements.

Always verify your lender's credentials through ASIC's professional register.

How to Find a Private Lender

Options include:

• Private lending marketplaces like Introducr, where borrowers post deals and lenders compete with offers
• Mortgage brokers who have relationships with private lenders

• Direct approach to private lending companies
• Professional networks in property and finance

Frequently Asked Questions

Is private lending legal in Australia?

Yes, private lending is completely legal. Lenders must comply with relevant regulations including ASIC requirements for consumer credit.

How fast can I get private lending?

Most private lenders can approve loans within 24-48 hours and settle within 3-7 business days, compared to 4-6 weeks for banks.

What LVR do private lenders offer?

Typically 65-75% for first mortgages, though some lenders may go higher with additional security or stronger exit strategies.

Can I get private lending with bad credit?

Yes, private lenders focus more on the property security and exit strategy than credit history, making it accessible for borrowers with impaired credit.

Next Steps

If you're considering private lending, start by:

• Determining how much you need and for how long
• Understanding your exit strategy (sale, refinance, other income)

• Getting a realistic valuation of your security property
• Comparing offers from multiple lenders

Introducr connects borrowers with verified private lenders across Australia. Post your funding request and receive competitive offers within 48 hours.